The local collective investment schemes (CIS) industry increased assets under management (AUM) to R3.27 trillion in the first quarter of 2023 from R3.16 trillion at the end of December 2022.
The CIS industry statistics for the quarter and the year to the end of March 2023, released by the Association for Savings and Investment South Africa (Asisa), show that participating CIS management companies achieved total net inflows of R114.8 billion over the 12 months to the end of March 2023.
Net inflows/outflows are calculated by deducting the rand value of repurchases (units sold by investors) from the total value of units bought by investors. The net inflow figure consists of new money invested and dividends reinvested.
According to Sunette Mulder, senior policy adviser at Asisa, the industry reported net inflows of R34.8bn for the first three months of this year, with South African multi-asset portfolios and South African interest-bearing portfolios attracting the bulk of the net inflows.
The strong growth in AUM and the healthy net inflows were achieved despite significant local and global market turmoil during the first quarter, Mulder says.
In South Africa, climbing inflation triggered a higher-than-expected interest rate hike of 50 basis points in March 2023, which, combined with ongoing power outages, placed significant downward pressure on the economy. The rand started to decline in the first quarter to its now-historic lows because of negative sentiment from global investors, driven by heightened risk aversion.
Swing to multi-asset continues
South African multi-asset portfolios remained firm favourites with investors for the second year, attracting net inflows of R59.2 billion to the end of March 2023. The most popular sub-categories were multi-asset high-equity, which recorded net inflows of R17.6bn in the 12 months to the end of March 2023, and multi-asset income, which attracted net inflows of R29bn, Mulder said.
“For many years, South African multi-asset portfolios were the preferred investment vehicles for local unit trust investors and their financial advisers, but this started changing in 2016. By the end of March 2021, the South African multi-asset category attracted net inflows of only R5bn over the 12 months. South African interest-bearing portfolios were taking the bulk of the net inflows.”
Mulder said the return to multi-asset portfolios is not surprising given the current market volatility and an uncertain outlook for the economy, the weak rand, and other macroeconomic factors. Multi-asset portfolios are designed to deliver a more stable performance than pure equity portfolios by smoothing out market volatility through diversification.
South African interest-bearing funds (short term and variable term) also attracted significant net inflows of R31.5bn for the 12 months to the end of March 2023, she said.
Mulder noted that although global equity general portfolios, on average, outperformed most other categories over one, five and 10 years, these portfolios recorded net outflows in the first quarter of this year and the third quarter of 2022. For the 12 months that ended in March 2023, global equity general portfolios attracted net inflows of only R1.5bn.
She reminded investors of the importance of thinking long-term when investing in CIS portfolios. “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.”
Equally important is a well-diversified investment portfolio constructed with the help of a qualified financial adviser.
Foreign portfolios
Locally registered foreign portfolios held assets under management of R737bn at the end of March 2023, compared to R694bn at the end of December 2022 and R633bn at the end of March 2022. These portfolios recorded net outflows of R4.7bn for the quarter that ended in March 2022, bringing total net inflows for the year to R15bn.
Foreign currency portfolios are denominated in currencies such as the dollar, pound, euro, and yen and are offered by foreign unit trust companies. These portfolios can only be actively marketed to South African investors if they are registered with the FSCA. Local investors wanting to invest in these portfolios must comply with Reserve Bank regulations and use their foreign capital allowance.
There are currently 631 foreign currency-denominated portfolios on sale in South Africa.
