ASISA stats – managers’ concerns make them search for safety
Jeremy Gardiner, director at Investec Asset Management, shares a few observations about investor behaviour in the third quarter and some lessons going into the final quarter of 2012
The third quarter saw significant flows into domestic fixed interest funds to the tune of R41.9 billion. This could be as a result of fund manager concerns that the seemingly pessimistic economic environment is not reflected in what appears to be a constantly optimistic stock market environment, particularly against the backdrop of events like Marikana and the spreading of labour unrest to other sectors in the economy.
These worries are leading some to seek safety away from equities. Given the low interest rate environment, the move into fixed interest funds is also a reflection of the global search for yield as well as a result of negative cash rates.
It is interesting to note that foreign net flows are up substantially to R1.4 billion from last quarter’s R142 million. This is most probably because investors are panicking following the decline in the currency.
It is not surprising that in this environment equities remain out of favour in South Africa. Equally unsurprising is the fact that once again, asset allocation funds remain the firm favourite. In this highly confusing investment environment most investors prefer to leave the actual asset allocation decision-making to a professional.
In conclusion, we expect foreign flows to remain firm – investors have been reminded yet again that the rand can weaken – as investors take advantage of what should be a slightly stronger currency (expect a new trading range of R8,25 – R8,75 to the US$), unless anything untoward happens in Mangaung. Also supporting foreign flows is investors’ recognition that, despite all the negative press regarding Europe and the US, there is a great deal of bad news already in the price, the outlook for the fourth quarter is marginally better and opportunities certainly still exist, more so than currently in SA equities.
