The latest collective investment scheme (CIS) industry statistics show that investors who remained in equity portfolios over the long term were rewarded.
South African equity general portfolios, on average, delivered a return of 3.7% over the year to the end of March 2024, while the FTSE/JSE All Share Index delivered 1.5% over the same period.
Over 20 years, however, SA equity general portfolios outperformed all the other categories and rewarded those who stayed the course, with an annual average return of 12.3% (net of fees). This is according to the CIS industry statistics for the quarter and the year to the end of March 2024, released this week by the Association for Savings and Investment South Africa (ASISA).
SA multi-asset high equity portfolios were not far behind, with a 20-year return of 11.5%. Multi-asset portfolios are designed to deliver a more stable performance than pure equity portfolios by smoothing out market volatility through diversification.
On the back of the weak rand, global equity general portfolios consistently delivered outstanding performance over the one-year (26.6%), five-year (14.8%), 10-year (12.8%), and 20-year (11.9%) periods.
Senior ASISA policy adviser Sunette Mulder pointed out that investors would have had to be invested for those periods to benefit from these returns.
A successful investment strategy requires a long-term commitment, together with an understanding that it is time in the market, as opposed to timing the market, that makes all the difference, she said.
Net inflow thanks to reinvestments
The statistics show that the local CIS industry increased assets under management to R3.57 trillion in the first quarter of 2024 from R3.49 trillion at the end of December 2023.
Participating CIS management companies (Mancos) achieved total net inflows of R103 billion over the 12 months to the end of March 2024.
Mulder noted that most of the net inflows was contributed by existing investors who reinvested income declarations (dividends and interest) worth R115bn over the 12 months to the end of March 2024. Without the reinvestments, Mancos would have reported net outflows of R12bn for the period.
“If reinvestments are excluded, our industry experienced net outflows in three of the four quarters to the end of March this year,” she said.
In the first quarter of this year, Mancos reported net inflows of R29bn, but if reinvestments are stripped out, the industry experienced net outflows of R5bn.
“Consumers are under financial pressure due to a tough economic climate and rising living costs. In addition, we find ourselves in an uncertain investment climate due to the upcoming elections. Throw in poor returns from the local market, and we have an environment not conducive to strong inflows of new money,” Mulder said.
Yet, she said, equity markets tend to reward investors who brave volatility and disregard short-term noise to commit their money for the long term.
Flow trends by category
SA multi-asset portfolios were dethroned as investor favourites by SA interest-bearing portfolios over the 12 months to the end of March 2024. SA multi-asset portfolios attracted net inflows of R42bn, while SA interest-bearing portfolios (short term and variable term) took R46bn.
SA money market portfolios claimed R16bn in net inflows for the period, while SA equities saw net inflows of only R3bn.
At the end of March 2024, 18% of assets under management were held in SA equity portfolios, while SA interest-bearing portfolios held 31% of assets. Half of all assets (50%) remain in SA multi-asset portfolios, with the rest in SA real estate portfolios (1%).
South African investors had a choice of 1 852 local CIS portfolios at the end of March 2024, an increase of 20 portfolios from the end of December 2023.
Locally registered foreign portfolios held assets under management of R928bn at the end of March 2024, compared to R855bn at the end of December 2023. These portfolios recorded net outflows of R27.9bn for the year to the end of March 2024.
There are currently 693 foreign currency-denominated portfolios on sale in South Africa.
