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Unit trust industry celebrates R2 trillion in assets under management

09 November 2016 Sunette Mulder, ASISA

The local Collective Investment Schemes (CIS) industry doubled its assets under management to a record R2 trillion at the end of September 2016 in just over four years. At the end of the first quarter 2012 assets breached the R1 trillion mark for the first time.

Sunette Mulder, senior policy adviser at the Association for Savings and Investment South Africa (ASISA), describes this as a considerable achievement given that it took the industry more than 40 years to reach the R1 trillion mark. The country’s first unit trust portfolio was launched in June 1965 with assets under management of R600 000.

Commenting on the CIS industry statistics for the quarter and year ending September 2016, Mulder says despite a turbulent investment environment, local CIS schemes attracted the highest quarterly net inflows in three years.

“Strong net inflows of R60 billion in the third quarter of this year pushed annual net inflows to a healthy R145 billion, indicating that investors are not too unsettled by recent political and economic events,” notes Mulder.

She adds that this is in direct contrast to the experience in the US as well as the UK and France, where negative investor sentiment has resulted in net outflows.

Mulder points out, however, that the majority of investors and their advisers continue to place their faith in South African Multi Asset portfolios, which contributed R66 billion towards the annual net inflows.

This is not surprising, she says, since Multi Asset portfolios were designed to offer investors a single diversified portfolio aimed at absorbing the highs and the lows of the markets.

Mulder points out that the rise in popularity of Multi Asset portfolios resulted in a significant shift in the asset composition of local portfolios over the past five years.

At the end of September 2011, SA Multi Asset portfolios held 29% of assets, Interest Bearing portfolios 47%, Equity portfolios 21%, and Real Estate 3%.

Five years later, at the end of September 2016, SA Multi Asset portfolios held 51% of assets, Interest Bearing portfolios 24%, Equity portfolios 21%, and Real Estate 4%.

By the end of third quarter, South African investors had a choice of 1 461 portfolios – an increase of 57 from the end of June 2016.

Who invested?

Mulder says that 32% of the inflows into the CIS industry in the 12 months to the end of September 2016 came directly from investors. This does not mean, however, that these investors acted without advice. A number of direct investors pay for advice and then make their choice of portfolio, she explains.

Intermediaries contributed 22% of new inflows. Linked investment services providers (Lisps) generated 21% of sales and institutional investors like pension and provident funds contributed 25%.

Offshore focus

Locally registered foreign portfolios grew assets under management to R360 billion at the end of September 2016 from R348 billion at the end of June 2016. These foreign portfolios recorded net inflows of R11.8 billion in the third quarter of this year.

Foreign currency unit trust 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 Financial Services Board. Local investors wanting to invest in these portfolios must comply with Reserve Bank regulations and will be using their foreign capital allowance.

There are currently 398 foreign currency denominated portfolios on sale in South Africa.

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