ANALYSIS: Solid first quarter for unit trusts
According to the statistics released this week by the Association for Savings and Investment South Africa (Asisa), the total inflows for the 12 months ending March 31, 2019 was R143.3bn.
Collective investment schemes comprise mainly unit trust funds and exchange traded funds.
Sunette Mulder, a senior policy adviser at Asisa, said that year-on-year, the collective investment industry also delivered a steady growth in assets under management.
At the end of March this year, total assets stood at R2.38 trillion, compared to R2.18 trillion at the end of March last year and R2.24 trillion at the end of last year.
Half the assets are held in South African multi-asset portfolios, followed by South African interest-bearing funds (28%), South African equity funds (19%) and South African listed property funds (3%).
At the end of March this year, South African investors had a choice of 1 599 funds. Short-term bond funds attracted the bulk of net inflows (R39.7bn) in the 12 months to the end of March this year, while money-market funds received R32.8bn and multi-asset Income portfolios R26.6bn.
While most investors continued to favour the perceived safety of interest bearing funds, Mulder said many investors were prepared to brave market volatility for the potential of higher returns offered by equity and high-equity, multi-asset funds over the long term. These attracted inflows of R13bn and R24.3bn respectively.
What was also interesting, Mulder said, were the net outflows recorded by low-equity and medium-equity multi-asset funds.
“The deduction can be made that investors were taking an either-or approach by opting for fixed-interest or high-equity exposure, with no room for medium- or low-equity exposure.”
Mulder said local funds with high equity exposure had, on average, outperformed (net of fees) interest-bearing funds over the long term. Over the one- and five-year periods to the end of March this year, however, interest-bearing assets outperformed equities.
Locally registered foreign funds held assets under management of R477bn at the end of March. The funds recorded net inflows of just shy of R1bn over the first quarter. Foreign currency unit trust funds are denominated in currencies such as the dollar, pound, euro and yen and are offered by foreign unit trust companies.
The portfolios can be marketed to South African investors only if they are registered with the Financial Sector Conduct Authority. Potential investors must comply with the Reserve Bank regulations and will be using their foreign capital allowance.
There are 455 foreign currency denominated portfolios on sale in South Africa.