Investors are ploughing more and more of their savings into collective investment schemes. The local collective investment industry attracted strong net inflows of R166 billion in 2016, pushing assets under management above R2 trillion. In 2015, the recorded net inflows were R101 billion, and in 2014, R109 billion.
Collective investment schemes comprise mainly unit trust funds and exchange traded funds, and are used by individual investors, corporate investors, investment platforms and institutional investors such as retirement funds, which invest on behalf of their members.
The figures, released this week by the Association for Savings & Investment South Africa (Asisa), show that multi-asset portfolios that invest mainly in South African assets remain the investment vehicle of choice, attracting R71 billion of the total net inflows in the 12 months to the end of December 2016.
Money market funds recorded net inflows of R50 billion last year, other South African interest-bearing funds (which invest in bonds and other debt instruments) saw inflows of R17 billion, and South African equity funds R10 billion.
Sunette Mulder, the senior policy adviser at Asisa, notes that the higher inflows into money market portfolios were not surprising given the equity market volatility in 2016. She says, however, that the higher figure is not necessarily a true reflection of retail investor sentiment, because a large chunk of the 2016 inflows went into corporate money market portfolios. Nevertheless, she says, South African investors remain far more risk-averse (in other words, conservative in their choice of investments) than their international counterparts.
At the end of last year, South African investors had a choice of a staggering 1 520 funds – an increase of 193 from 2015.
Mulder says 31 percent of last year’s inflows into collective investment schemes came directly from individual investors – down from 32 percent in 2015. Intermediaries contributed 22 percent of the inflows, compared with 20 percent in 2015. Linked-investment services providers (investment platforms) generated 20 percent of inflows (24 percent in 2015) and institutional investors such as pension and provident funds contributed 27 percent (24 percent in 2015).
Locally registered foreign funds held assets under management of R363 billion at the end of December 2016, a slight decrease from the R364 billion at the end of December 2015. These foreign portfolios recorded net inflows of R22.8 billion in 2016. These funds, offered by offshore asset managers, are denominated in currencies such as the dollar, pound, euro and yen. They can be marketed to South African investors only if they are registered with the Financial Services Board. Local investors who want to invest in these funds must comply with Reserve Bank regulations regarding their foreign capital allowance.