Net sales by investors in collective investment schemes (CIS) exceeded net inflows from sales in the second quarter of this year as hard-pressed South Africans tapped into their investments.
Despite this, assets under management (AUM) increased by 3% from the end of the first quarter of 2023, according to the statistics for the quarter and the year to the end of June 2023, released by the Association for Savings and Investment South Africa (Asisa).
AUM stood at R3.36 trillion at the end of the second quarter 2023, up from R3.27 trillion at end of the first quarter.
Over the 12 months to 30 June 2023, assets grew by 13%, primarily because of strong stock market performance, Asisa said.
Participating CIS management companies attracted new investments worth R567.3 billion in the second quarter, while existing investors sold investments worth R577.7bn, resulting in net outflows of R10.4bn.
According to Sunette Mulder, senior policy adviser at Asisa, existing investors also reinvested income declarations (dividends and interest) worth R26.4bn.
“While income declarations that are reinvested are not considered new money, investors who receive them are given the choice to buy additional units in their existing portfolios instead of withdrawing this money,” Mulder said.
The R26.4bn reinvestments in the second quarter exceeded the net outflows of R10.4bn, leaving the industry with an effective net inflow of R16bn.
Mulder said unit trust portfolios are designed to give investors easy access to their money. When consumers are under pressure, and their emergency savings have been depleted, they are likely to turn to their unit trust investments for financial relief, she said.
“During the second quarter, the repo rate increased by 0.5% to a 14-year high of 8.25%, which placed an additional burden on consumers servicing debt like home loans and car repayments. And in May this year, another petrol price increase meant that South Africans were paying on average R1.50 a litre more than in the previous year. Given the overall increase in living costs in South Africa, we were not surprised to see investors tapping into their investments.”
Sector performance
Global equity general portfolios, on average, outperformed most other categories over one, five and 10 years. But these portfolios recorded net outflows in three out of four quarters to the end of June 2023. For the 12 months that ended June, global equity general portfolios reported net outflows of R6.7bn.
Mulder said investors who have taken a long-term view of 20 years or more on local equities will be pleased to know that the average performance delivered by the South African equity general sub-category over 20 years was 13.7%, followed by South African multi-asset high equity with 12.3%, and global equity general with 11.3%.
This highlights the importance of thinking long-term when investing in CIS portfolios and constructing a well-diversified investment portfolio with the help of a qualified financial adviser, she said.
Trends in investment flows
SA multi-asset portfolios continued to regain popularity with investors in the second quarter, holding 50% of all CIS industry AUM by the end of June 2023.
At the end of June, 19% of AUM were in SA equity portfolios, while SA interest-bearing portfolios held 30%, and SA real estate portfolios 1%.
SA multi-asset portfolios were the preferred investment vehicles for local unit trust investors and their financial advisers until 2016, when SA interest-bearing portfolios started attracting the bulk of the net inflows.
Local multi-asset portfolios attracted net inflows (including reinvestments) of R67bn over the 12 months to the end of June, the highest year-on-year since June 2016. The most popular categories were SA multi-asset income portfolios, which recorded net inflows of R39.6bn in the 12 months to the end of June, and SA multi-asset high-equity portfolios, which recorded net inflows of R18.5bn.
“Given the current market volatility and an uncertain economic outlook, it is unsurprising that investors are opting for multi asset portfolios designed to deliver a more stable performance than pure equity portfolios by smoothing out market volatility through diversification,” Mulder said.
SA interest-bearing portfolios (short term and variable term) attracted significant net inflows of R34bn for the 12 months to the end of June.
Money market portfolios received R26.4bn.
South African investors had a choice of 1 805 local CIS portfolios at the end of June, an increase of 16 portfolios from the first quarter of this year.
Locally registered foreign portfolios held AUM of R810bn at the end of June, compared to R737bn at the end of March 2023. These portfolios recorded net outflows of R16.5bn for the quarter to the end of June, bringing total net inflows for the year to R17bn.
There are 643 foreign currency-denominated portfolios on sale in South Africa.
Hedge fund inflows
The South African hedge fund industry ended the second quarter of 2023 with AUM of R120bn. This represents an increase in assets of R7bn over the six months from the end of December 2022, when assets stood at R113.01bn.
The number of hedge funds increased from 216 at the end of 2022 to 219 at the end of June 2023.
The hedge fund industry attracted net inflows of R4.27bn in the first six months of 2023.
