SA equity investment too low - ACI
Investors and financial advisers need to take a hard look at the low percentage of funds being allocated to equities, says Di Turpin chief executive of the Association of Collective Investments.
"Particularly for the longer term investor, the asset allocation figure of some 32 percent for equities is out of line and as a result clients have not benefitted from the stock market boom of the past three years. Historically equities have shown the best performance of any market sector. Local investors need to invest in line with their goals and be less concerned with short term market cycles.
"If one takes by comparison the international figures for 42 countries issued today by the Washington-based Investment Company Institute the global figure for March 2007 is 48 percent. These statistics have reinforced that South African investors are not using the full wealth creation benefits of Collective Investments."
Since 1981 SA Domestic General Equity Funds have only shown negative growth over two years in 1998 and 2000. The ACI says that R1000 invested in the average Domestic Equity General fund on 31 December 1980 would be worth R109 328 at the end of December 2006 for a return of 19,8% per year over that period.
The latest global figures show that collective investments assets worldwide rose 4,6 percent to $22.72 trillion at the end of the first quarter of 2007. Net cash flow reached the $417 billion mark ($404 billion in the fourth quarter).
Equity fund flows were slightly down at $118 billion ($150 billion). The Americas accounted for $80 billion ($79 billion), the Asia/Pacific region for $43 billion ($36 billion) and Europe had a net outflow of $5 billion ($35 billion inflow).
The number of mutual funds worldwide stood at 62 522 at the end of the first quarter of 2007. By type of fund, 41 percent were equity funds, 22 percent were bond funds, 21 percent were balanced/mixed funds, and 5 percent were money market funds.
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