ASISA stats – lots of churn but a pick-up in offshore flows

The first quarter of 2012 saw a continuation of the relief rally from the SA equity market that commenced during the last quarter of 2011. Up 14.9% over the six-month period, investors – weary of bad news – were buoyed by the fact that Chinese growth appe

Despite this optimism and the fact that the unit trust industry boasts more than R1 trillion in assets under management, the first quarter collective investment scheme statistics released by ASISA today reveal that inflows were only marginally positive at R719m. This is in strong contrast with previous quarters, which saw large inflows of approximately R12bn and R14.5bn respectively. What’s more, domestic funds saw outflows of more than R600m, compared to previous quarters where they accounted for the bulk of inflows.

Within domestic funds, the first quarter saw significant flows out of dividend income funds as a result of regulatory developments affecting these funds. The majority of these flows appear to have been absorbed by multi-asset funds, as investors continue the trend witnessed over the last couple of years of leaving the difficult asset allocation decisions to investment professionals.

It appears that investors are finally starting to look offshore for returns, with a four-fold increase in net flows into foreign funds (up to approximately R1.36bn from R329m). This increase helped to offset the outflows out of domestic funds.

In conclusion, we don’t believe the recent rally is the beginning of a bull market, as there are still too many problems plaguing the global economy. The rest of the year should see a consolidation at current equity levels as the world grinds sideways, most likely with a few setbacks along the way. Ironically, this kind of world is the best prognosis from a South African perspective, as a world stumbling along uncomfortably will eventually see global investors return to emerging markets looking for yield, which will benefit emerging market equities and currencies. However, renewed concerns regarding Chinese growth and continued fears about the health of Europe will see investors remain skittish for some time to come.