South Africa's Collective Investment Schemes (CIS) industry, also known as unit trusts, attracted net new investments of R9 billion in the third quarter of this year while existing investors reinvested income declarations (dividends and interest) worth R30 billion.
The industry, therefore, concluded the third quarter of this year with net quarterly inflows of R39 billion.
The CIS industry statistics for the quarter and year ended September 2023, were released by the Association for Savings and Investment South Africa (ASISA) and showed that despite the net inflows, the industry’s assets under management dropped marginally to R3.34 trillion from R3.36 trillion at the end of the second quarter of this year.
Sunette Mulder, senior policy advisor at ASISA, said the decline in assets under management could be attributed to market volatility in the third quarter, which resulted in a drop of 3.5% in the JSE All Share Index (ALSI).
Mulder said, despite this, over the 12 months to September 30 this year, assets under management grew by 11% from R3.01 trillion at the end of the third quarter of last year.
At the end of September this year, half of the assets under management in local portfolios were invested in SA Multi Asset portfolios and 31% in SA Interest Bearing portfolios. SA Equity portfolios held 18% of assets, and SA Real Estate portfolios only 1%.
South African investors had a choice of 1 824 local CIS portfolios at the end of September, an increase of 19 portfolios from the second quarter of this year.
On investor trends, South African Multi-Asset portfolios attracted R60.5 billion in net inflows (including reinvestments) over the 12 months to the end of September this year, the second highest year-on-year since September 2016. The most popular Multi Asset categories were SA Multi Asset Income portfolios, with net inflows of R29.7 billion in the 12 months to the end of September, and SA Multi Asset High Equity portfolios, with net inflows of R20.4 billion.
Mulder said the SA Interest Bearing portfolios (Money Market, Short Term, and Variable Term) were also popular with investors, attracting net inflows of R56.2 billion in the third quarter of 2023.
She also noted that with interest Global Equity General portfolios, on average, reported net outflows of R3 billion over the 12 months to the end of September 2023 despite outperforming the most popular portfolio categories over the one-year, five-year, and 10-year periods. However, over the 20 years, SA Equity General portfolios outperformed, delivering, on average, 13.1% a year.
With offshore focus, locally registered foreign portfolios held assets under management of R765 billion at the end of September this year, compared to R810 billion at the end of June this year. These portfolios recorded net outflows of R7.12 billion for the quarter ended September this year. Following the net outflows of R16.5 billion in the second quarter ended June this year, net outflows for the year totalled R24.6 billion.
Foreign currency unit trust portfolios were denominated in currencies such as the dollar, pound, euro, and yen and were offered by foreign unit trust companies. These portfolios could only be actively marketed to South African investors if registered with the Financial Sector Conduct Authority (FSCA). Local investors wanting to invest in these portfolios must comply with Reserve Bank regulations and would be using their foreign capital allowance.
There were currently 661 foreign currency-denominated portfolios on sale in South Africa.
Meanwhile, in its executive summary, the US Department of State's 2023 Investment Climate Statements: South Africa said the country boasts the most advanced, broad-based economy in sub-Saharan Africa.
It said the investment climate was fortified by stable institutions; an independent judiciary and robust legal sector that respected the rule of law; a free press and investigative reporting; a mature financial and services sector; and experienced local partners.
In dealing with the legacy of apartheid, it said South African laws, policies, and reforms sought economic transformation to accelerate the participation of and opportunities for historically disadvantaged South Africans.
“The government of South Africa (GoSA) views its role as the primary driver of development and aims to promote greater industrialisation, often employing tariffs and other trade measures that support the domestic industry while negatively affecting foreign trade partners,” it said.