A record year for collective investment schemes
The Collective Investment Schemes (CIS) industry achieved record net capital inflows in 2009. Investors affirmed their confidence in the industry by pouring R96bn into the available unit trust fund categories. To find out about unit trust performance and the most popular investment categories in the final quarter 2009, we attended the Association of Savings and Investments SA (ASISA) CIS statistics presentation. ASISA chief executive Leon Campher addressed the media on 3 February 2010.
Assets under management in the CIS industry topped R786bn at 31 December 2009 in some 904 funds. As part of the ongoing refinement of CIS statistics future reports will eliminate double counting by stripping out Fund of Funds and Hybrid funds. The new methodology reduces the assets under management in the industry to R750bn.
Money market funds remain popular
Domestic assets are reported in a number of unit trust categories. Money market funds account for the bulk of domestic assets (33%), followed by equity (24%), prudential (21%) and fixed interest varied specialist (12%). “Money market, although declining, on a relative basis remains a large portion of the assets in the CIS industry,” said Campher. He noted that the prudential category included asset allocation unit trusts which have grown in popularity in recent years.
There were some significant changes in the per-category capital flows. This was the first year since 2005 that equities experienced a net inflow for the calendar year. Investors backed equity unit trusts to the tune of R10.8bn. “It’s quite encouraging to see equity positive again,” said Campher. Even so, equity inflows were dwarfed by the R47.6bn that poured into money market and fixed income funds. The prudential category attracted R31bn! “Investors are leaving the asset allocation decisions to fund managers,” said Campher.
Quality over quantity
ASISA supplied some interesting statistics from the CIS industry. The first slide showed the ten largest (by assets under management) unit trust. Positions one, two and three were occupied by money market funds Absa Money Market (R55.298bn), Standard Bank Money Market (R37.594bn) and Prudential Money Market (R34.644bn). One of the country’s most popular management companies, Allan Gray, had three funds in the top 10 with R84bn under management! Campher noted that Allan Gray – with only eight funds – proved that success in the CIS industry wasn’t linked to a multitude of different product offerings. “You don’t have to launch a new fund every two weeks to try and make money,” he said, adding that the industry was working to address the proliferation of funds.
South Africa’s 10 largest management companies (Stanlib, Alan Gray, Absa, Investec, Prudential, Old Mutual, Sanlam, NedGroup Investments, RMB and Coronation) held 80.1% of total CIS assets under management. The rest (some 30 companies) share 19.9% of industry assets!
The new statistics allow for a closer look at the split between retail and institution assets in the industry. Campher observed: “In the institutional space we have quite a large percentage in bond funds. The big institutional managers often consolidate the pension funds they are managing into a single bond fund.” Institutional money is heavily invested in equity funds while money market unit trusts are preferred by retail investors who account for 72% of category assets.
Equities back on top
After a dismal 2008 equities snatched the top performing funds laurels in 2009. The nine equity categories all delivered in excess of 20% for the year – with Domestic Equity Value (+33%), Domestic Equity Financial (+33%) and Domestic Equity Large Cap (+31%) topping the charts. Over longer periods (five years) the equity funds show their true merit. The five year annual compound return from equity resource unit trusts was 22.41% with equity large cap (+19.61%) and equity value (+17.91%) following closely. A quick look at the JSE All Share index since 2004 underlines this trend. “For someone who has had time in the market in equities you would have enjoyed an annual index return of 17% per annum over five years,” said Campher.
Editor’s thoughts: The huge net inflows to the unit trust industry suggest South Africa has woken up to the importance of saving. Money poured in despite 2009 being a particularly difficult investment year! Do you invest directly in unit trusts, or do you seek professional advice? Add your comments below, or send them to [email protected]
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