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ASISA stats – investors dip their toes into equities but still favour asset allocation funds

04 August 2010 Jeremy Gardiner, Director, Investec Asset Management

As witnessed during the first quarter of 2010, the second quarter collective investment scheme statistics released by ASISA today further cemented the trend of investor choice towards asset allocation funds. This category attracted 40% of the flows for the quarter and highlights the fact that current market conditions have left investors confused about what they should be doing from an investment perspective.

It was interesting to note, however, that flows into the equity sector doubled to R855m over the second quarter. Despite the FTSE/JSE All Share Index posting a decline of 8.2% for the three months, the flows suggest that investors believe that the world – although volatile – is fundamentally healing.

We anticipate that the third quarter will see further flows into asset allocation funds, although flows into equity funds may wane as talk about the possibility of a double dip recession intensifies. At this stage, however, given the current environment of low global interest rates and potentially rising inflation, equities remain the preferred asset class over the long term.

It’s also interesting to note close to R1 billion going offshore. This is down from the first quarter flow of R2.5 billion, probably as a result of increasingly negative press over the quarter regarding the economic climate currently battering the US, Europe and the UK, and the relatively brighter outlook for emerging markets and South Africa. However, with rand strength at current levels, and with policy initiatives increasingly geared towards weakening the currency, investors cannot afford to overlook offshore diversification, even if purely as a currency diversification exercise.

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