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Assets managed by local CIS industry more than double over five years

07 August 2014 Leon Campher, ASISA
Leon Campher, CEO of ASISA.

Leon Campher, CEO of ASISA.

The local Collective Investment Schemes (CIS) industry experienced a renewed surge in net inflows in the second quarter of this year, attracting R42 billion in the three months to the end of June 2014. In the first quarter of this year net inflows amounted to R27 billion.

This brings to R151 billion the total net inflows for the 12 month period to the end of June 2014 – the second highest net inflows for any rolling 12 month period to the end of June.

Quarterly statistics for the local CIS industry, released today by the Association for Savings and Investment South Africa (ASISA), show that the end of the second quarter this year the industry managed assets of R1.64 trillion compared to R1.54 trillion at the end of the first quarter. The industry offered investors 1 088 portfolios.

Commenting on the quarterly statistics, Leon Campher, CEO of ASISA, points out that the assets managed by the industry more than doubled over the past five years. At the end of June 2009, local CIS portfolios managed assets of R703 billion.

How SA portfolio asset allocation has changed over the past five years

Campher says the bulk of current assets under management are held in South African Multi Asset portfolios. At the end of June 2014, SA Multi Asset portfolios held 47% of assets, compared to 24% only five years ago.

Five years ago, at the end of June 2009, 48% of assets under management was still concentrated in SA Interest Bearing portfolios. By the end of June this year the percentage of assets in the SA Interest Bearing category had reduced to 28%.

Investor exposure to the SA Equity and SA Real Estate categories, however, stayed constant over the five-year period. At the end of June 2009 the SA Equity category held 26% of assets (22% at the end of June 2014) and SA Real Estate 2% (3% at the end of June 2014).

Campher says five years ago investors were still shell shocked from the effects of the global financial crisis which unfolded in 2008 and sought refuge in Fixed Interest portfolios. However, instead of moving back into pure Equity portfolios, investors and their financial advisers opted for SA Multi Asset portfolios, thereby effectively outsourcing asset allocation decisions to expert portfolio managers.

According to Campher this trend continues with local investors opting almost exclusively for SA Multi Asset portfolios.

SA Multi Asset still the preferred choice

Over the 12 months ending June 2014, SA Multi Asset Portfolios attracted R105 billion of the total R151 billion net inflows attracted by the industry. SA Interest Bearing portfolios came in second with R21 billion and Money Market portfolios third with R2 billion.

Multi Asset portfolios make it possible to achieve diversification across asset classes within one fund. Expert portfolio managers determine the appropriate exposure to the different asset classes in line with their investment mandates. The SA Multi Asset category is made up of the following sub-categories: Income, Low Equity, Medium Equity, High Equity and Flexible.

Campher says for the majority of investors Multi Asset portfolios are the right choice. “These portfolios were designed to deliver a more stable performance than pure equity portfolios by smoothing out market volatility through diversification.”

There are 524 portfolios in the SA Multi Asset category.

Who invested?

Campher says the inflows over the 12 months to the end of June 2014 came either directly from investors (29%) or were channeled via intermediaries (27%).

Linked investment services providers (Lisps) generated 23% of sales and 21% of sales was received from institutional investors like pension and provident funds.

He says this pattern is almost identical to the one presented by the first quarter’s statistics.

Offshore focus

Locally registered foreign funds held assets under management of R228 billion at the end of June 2014, compared to R214.9 billion at the end of March 2014.

These foreign funds recorded net inflows of R2.6 billion in the second quarter of this year, after having experienced net outflows in the first quarter of this year.

Foreign currency unit trust funds are denominated in currencies such as the dollar, pound, euro and yen and are offered by foreign unit trust companies. These funds can only be actively marketed to South African investors if they are registered with the Financial Services Board (FSB). Local investors wanting to invest in these funds must comply with Reserve Bank regulations and will be using their foreign capital allowance.

There are currently 309 foreign currency denominated funds on sale in South Africa.

 

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