Market volatility has resulted in assets under management (AUM) by the collective investment schemes (CIS) industry dropping below the R3 trillion threshold reached in the fourth quarter of last year.
Assets under management stood at R2.98 trillion at the end of June, compared to R3.09 trillion at the end of March, according to statistics released by the Association for Savings and Investment South Africa (Asisa).
The decline in AUM was despite net inflows of R21 billion in the second quarter of this year, which brought total net inflows for the 12 months to the end of June to R110bn.
Sunette Mulder, senior policy advisor at Asisa, attributed the 3.4% decline in AUM during the second quarter to extreme stock market volatility.
“The FTSE/JSE All Share Index (Alsi) took a hammering in June, which resulted in an 8% drop for the month. Looking at the quarter, the JSE Alsi was down by 11.69%, while in rand terms, the FTSE 100 was down 0.46% and the S&P 500 dropped by 5.94%. All in all, not a good quarter for equities.”
Despite the turbulence plaguing stock markets since the beginning of the year, South African equity general portfolios, on average, kept pace with inflation over the one year to the end of June, delivering a return (net of fees) of 6.6%, while inflation averaged 6.5%, Mulder said.
Over the five-, 10- and 20-year periods, domestic equity general portfolios, on average, outperformed inflation “convincingly”.
Although South African multi-asset high-equity and low-equity portfolios, on average, lagged inflation over the year to the end of June, these portfolios kept pace with the inflation-beating performance of local equity general portfolios over five, 10 and 20 years.
Multi-asset funds back in vogue
Despite the strong equity performance over the long-term, investors started exiting South African equity general portfolios in the second quarter, shifting into South African multi-asset and interest-bearing portfolios, with a preference for interest-bearing variable-term portfolios, Mulder said.
“In recent years, investor appetite for South African multi-asset portfolios had waned, but we started noticing over the past 12 months that South African multi-asset portfolios were regaining popularity with investors, and this trend continued into the second quarter of this year,” she said.
According to Mulder, the domestic multi-asset category attracted R66bn in net inflows for the 12 months to the end of June, the highest in six years.
The South African interest-bearing category recorded net inflows of R24bn and the South African equity general category R7bn.
South African money market funds recorded net outflows of R20bn for the 12 months to the end of June.
Mulder said that at the end of June, 19% of assets under management were held in South African equity portfolios, while South African interest-bearing portfolios held 31% of assets.
Just under half of all assets (48%) were in South African multi-asset portfolios, with the rest in South African real estate portfolios (2%).
Where the inflows came from
Mulder said 23% of the inflows into the CIS industry in the 12 months to the end of June came directly from investors.
Intermediaries contributed 26% of new inflows. Linked investment services providers generated 34% of sales and institutional investors contributed 17%.
Offshore funds
Locally registered foreign portfolios held AUM of R638bn.
These foreign portfolios recorded net inflows of R15.6bn for the June quarter, bringing total net inflows for the year to R23.5bn.
There are 621 foreign-currency-denominated portfolios on offer in South Africa.
Hedge fund AUM grows despite consolidation
The South African hedge fund industry ended the second quarter of 2022 with AUM of R104.54bn. This represents an increase in assets of R17.61bn over the six months from the end of December 2021, when assets stood at R86.93bn.
The half-yearly hedge fund statistics compiled by Asisa show that the growth in assets was achieved despite further fund consolidation and closures, reducing the number of hedge funds from 216 at the end of 2021 to 212 at the end of June 2022.
The hedge fund industry attracted net inflows of R1.95bn in the first six months of 2022, compared to only R0.59bn for the 12 months to the end of December 2021.
