The closure of South Africa’s biggest money market fund in the second quarter knocked the collective investment scheme industry, with total net inflows hitting their lowest level in five years in the year to the end of September.
Investors in the Absa Money Market Fund were given until 1 July to switch their money into alternative options, says Sunette Mulder, senior policy adviser at the Association for Savings and Investment South Africa (Asisa).
Absa provided its money market investors with the option of seamlessly transferring their investment into an Absa investment bank account that offers an interest rate equivalent or better than was offered by the Absa Money Market Fund.
According to Mulder, the assumption is that most clients went with this option, which explains why the withdrawals reflect as net outflows in the CIS statistics for the second quarter of 2021.
Net outflows of R18bn were recorded for the second quarter. Mulder says without the forced outflows from the Absa Money Market Fund, the industry would have posted a net inflow of R33bn for the second quarter.
Local collective investment schemes attracted net inflows of R27bn in the third quarter, bringing to R68bn the total net inflows for the 12 months to the end of September.
Sub-categories with the biggest inflows
According to Asisa, the sub-categories that saw the biggest inflows during the third quarter were:
- South African interest-bearing short term and variable term: R8.9bn. These sub-categories have received total net inflows of R43.3bn in the year to the end of September.
- Global equity general: R5.8bn. This brings to R35bn the total net inflows attracted by global equity general portfolios in the 12 months to the end of September. On average, global equity general portfolios delivered double-digit returns for the one-, five- and 10-year periods to the end of September.
- Domestic equity general: R5.6bn. These portfolios attracted net inflows of R7.7bn in the 12 months to the end of September.
Mulder says that by the third quarter, investors finally started taking note of the strong performance of the FTSE/JSE All Share Index (Alsi), which closed at 66 086 points on 30 June (up from 59 409 on 31 December 2020). As investors started moving their money into South Africa equity general portfolios, the Alsi started pulling back, ending the third quarter on 64 281 points. However, in October alone, the Alsi gained 5.2%.
Intermediaries contributed most (38%) of the new flows into CIS funds in the year to the end of September, Mulder says. The balance came directly from investors (26%), linked investment services providers (20%) and institutional investors (16%), such as pension and provident funds.
The biggest net outflows for the 12 months to the end of September was recorded for the South African interest-bearing money market sub-category, mainly due to the closure of the Absa Money Market Fund.
Mulder says the local CIS industry held assets under management of R2.96 trillion, spread across 1 685 portfolios, at the end of September. Just under half of these assets were held in South African multi asset portfolios (48%), with the rest in domestic interest-bearing portfolios (31%), equity portfolios (19%) and real estate portfolios (2%).
Locally registered foreign portfolios held assets under management of R648bn at the end of September, up from the R623bn of the previous quarter. These foreign portfolios recorded net outflows of R0.9bn in the third quarter.
There are 575 foreign currency-denominated portfolios on sale in South Africa.
