New money flows signal client resilience in tough times
If you focus on the mainstream news, you can be forgiven for thinking you and your clients are in desperate trouble. The past few months have seen an escalation in geopolitical tensions as the United States (US) deploys trade tariffs as blunt instruments to force a wide range of diplomatic outcomes. At the same time, South Africa’s relationship with the US has hit an all-time low, with the long-standing African Growth and Opportunity Act (AGOA) export incentive all but ended.
The GNU under fire
To make matters worse, local political parties are making the Government of National Unity (GNU) virtually unworkable, putting party and personal interests ahead of the citizens of South Africa. This mess was exhibited in court challenges over proposed VAT increases in the 2025 National Budget, which took three iterations to pass. And things escalated in May, with the firing of a Democratic Alliance (DA) Deputy Minister of Trade, Industry and Competition by the African National Congress (ANC) president, Cyril Ramaphosa.
The best way for financial advisers to navigate clients through this mess is to refocus them on their long-term financial plan and remind them of the value that flows from a sensible approach to both investment and savings. For some good news, you might nudge them to the most recent Collective Investment Schemes (CIS) industry, which has seen strong net inflows despite extreme market volatility.
CIS funds, or unit trusts, are vital building blocks in South Africa’s discretionary investment and retirement savings realm. “Despite a turbulent start to the year, the local CIS industry concluded the first quarter of 2025 with assets under management (AUM) just shy of R4 trillion and the strongest net quarterly inflows in several years,” noted the Association for Savings and Investment South Africa (ASISA), in its Q1 2025 update.
Sunette Mulder, senior policy adviser at ASISA, said that a series of local and international upheavals led to a rollercoaster quarter for the South African stock market. Your writer has hinted at these in the opening paragraphs already. Discord within the GNU over the February 2025 National Budget contributed to a sharp decline in the JSE All Share Index (ALSI) and a weakening of the rand between January and March. And no sooner had the markets clawed back some of these losses, than the March 2025 US trade tariff shake-up sent global equity markets plummeting again.
Another victory for time in the market
Looking back, you will see another victory for the ‘time in the market over timing the markets’ crowd. As ASISA reported, the JSE ALSI posted a 5.9% gain in the first quarter of 2025 on the back of strong commodity prices and equally strong performances from listed commodity plays. Your clients will have benefitted from a total return from the JSE ALSI of 22.9% for the 12 months to 31 March 2025. And measured in rand, local equities outperformed the S&P 500 in both the first quarter and for the 12-month period, and the FTSE 100 over the 12-month period.
This market performance filtered into the CIS industry statistics, confirming a resilient savings culture among South African investors. According to ASISA, total assets under management across local CIS portfolios reached R3.93 trillion (almost R4 trillion) at the end of March 2025, a modest 1.4% increase from December 2024, but a more impressive 10% rise over the latest year. Total net inflows for the 12-month period came in at R104.14 billion, with R12 billion being ‘fresh’ money contributed during the first quarter alone.
“Considering the extreme market volatility, geopolitical strains, and local political uncertainty at the start of this year, we were positively surprised by the most substantial quarterly inflow of new money since the third quarter of 2022,” Mulder said. It is important to note this was not reinvested income from dividends and interest, but new investment (real money) coming into the system despite the financial market noise. Combined with reinvestments, total net inflows for the quarter amounted to R48 billion, the highest since 2020.
Lessons from an investing legend
Investing through the noise is exactly what the world’s greatest investor, Warren Buffett, advocated for throughout his career. Buffett recently announced his retirement from day-to-day portfolio management at Berkshire Hathaway, after more than six decades at the helm. His enduring lesson to your clients and other stock market investors is unchanged: success comes not from reacting to headlines, but from owning quality assets, holding them through the financial market cycles, and resisting the urge to time the market. Or put differently, long-term investing requires discipline, patience, and perspective.
Returning to the ASISA Q1 2025 statistics, you will learn that South African investors had a choice of 1883 local CIS portfolios. Diving deeper, you found that investors continue to favour local Multi Asset portfolios. These portfolios offer a blend of equity, fixed income, property, and cash, and now account for nearly half (49.5%) of total CIS assets. Multi Asset portfolios drew R18 billion in net inflows for the quarter and R45 billion for the full year, a testament to their continued appeal among long-term savers seeking diversification.
Interest Bearing portfolios were the quiet achievers. These funds, which already accounted for 30.6% of the industry’s total AUM, attracted another R29 billion for the quarter, and R52 billion in net inflows over 12 months. Investors are drawn to this segment by higher interest rates and relative capital stability. SA Equity funds managed to attract R3 billion in net inflows for the quarter but closed the year with net outflows of R13 billion. They represented 18.6% of total assets at the end of the first quarter.
At first glance, your writer was surprised by this; but the statistic reminds us how investor sentiment tends to waver in the face of short-term risk, even when the long-term case remains strong.
Investors are still looking offshore
At the margin, foreign exposure also remained popular. South African-registered foreign portfolios held assets worth R974 billion at the end of March 2025, with quarterly net inflows of R5.08 billion, and an R8.86 billion inflow for the full year. There are now 756 foreign currency-denominated unit trust portfolios available to South African investors.
These portfolios are priced in dollars, pounds, euros, or yen; governed by South African Reserve Bank foreign capital rules; and offer access to offshore markets without the burden of direct offshore account admin. These funds must be registered with the Financial Sector Conduct Authority (FSCA) before being marketed locally.
For advisers, the Q1 2025 ASISA statistics serve as a quiet reminder that, even in a messy and uncertain environment, South Africans are still investing. You can play your part by reminding your clients that long-term plans work best, and that they need to resist making knee-jerk changes to their portfolios and rather let the magic of time in the markets and compounding take effect.
Writer’s thoughts:
Currency shocks, political drama and trade tariff tantrums have introduced record volatility to financial markets of late. How are you helping clients stay committed to their long-term financial plans amid all the noise? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
