Asha Speckman

ASSETS managed by the local collective investment schemes industry grew by R85 billion to R1.04 trillion during the year to June, with unit trusts producing higher income yields more popular with consumers during the period, according to the Association for Savings and Investment SA (Asisa).

In figures published yesterday, the association said that during the second quarter of the year alone sales of collective investment schemes rose to R242bn, one of the highest recorded figures.

But money market funds were affected by heavy outflows and during the second quarter of the year these funds realised net outflows of R8.8bn.

This trend resulted in an increase in net annual outflows from money market funds to R43.8bn.

Leon Campher, the chief executive of Asisa, said the withdrawals from domestic money market funds were due to continued repositioning by corporate cash holdings but the repositioning by corporate funds was a normal occurrence.

Campher said softer money market rates ahead of the recent interest rate cut had possibly resulted in some investors switching to unit trust funds that produced higher income yields.

Dimitri Mitropapas, a stock broker at PSG Konsult, said that the heavy outflows in domestic money market funds were due to “the fact that interest rates worldwide are declining, making it more attractive to invest in other asset classes especially shares, and debt servicing becomes cheaper, which can explain the outflow from money market funds”.

He predicted that investor behaviour would change when the interest rate turned as central banks worldwide began to increase rates to counter higher inflation. This would result in shares and other asset classes becoming less attractive and interest-bearing investments such as money market funds gaining popularity.

Mitropapas said much growth had taken place in passively managed exchange-traded funds.

Mitropapas said: “So investors are becoming more investment-savvy and are looking at a more balanced type investment approach, which collective investments offer.

“This indicates that consumers are managing their debt more prudently and as a result of lower interest rates are investing for the longer term.”

The domestic asset allocation category attracted the bulk of net inflows during the second quarter of the year.

Domestic fixed interest funds attracted the highest net inflows. The domestic fixed interest varied specialist sector recorded new inflows of R3.1bn and the domestic fixed interest income sector reported inflows of R2.8bn.

Analysts were unable to provide an outlook on the performance for collective investment schemes, which depended on the performance of stock markets worldwide and the economic situation in Europe.

Campher added that the outlook for the unit trust industry had been consistent over the past four years.

The industry had reported net inflows of about R80bn a year over the past four years and was expected to continue reporting the same.

Jean-Pierre Verster, an analyst at 36One Asset Management, said other factors to consider included the capital value of funds that were allocated to equities listed on the JSE.

Verster said “we could see outflows from retail investors”, who were becoming more cautious with regards to their exposure to listed equity investments.