Sanlam Investment Management commentary on ASISA quarter two unit trust statistics

Candice Paine, head of retail at Sanlam Investment Management (SIM).

“In light of South Africa’s notoriously low savings rate, strong unit trust flows in the second quarter of 2013 could certainly be viewed in a positive light. The quarter saw a total netflow of R54,2-billion into South African unit trusts. However, while

Paine said the total unit trust industry assets now stand at R1.5-trillion (2008: R661-billion). Of the quarter’s total, R46,6-billion flowed into retail domestic unit trust funds - an investment vehicle for the man in the street. “Retail investor behaviour has often been deemed to be behind the curve. For instance, when the rand loses value, retail investors tend to head offshore. However this time around, we are have not seen the rand’s drop strongly in the stats as there hasn’t been a marked increase in capital flowing into rand denominated offshore funds. This may be because investors have learnt their lesson and have begun to behave more rationally, for instance by sticking to an investment plan, or they are relying on their appointed fund managers to make these asset allocation decisions for them using their mandated offshore allowance. Alternatively they could also be investing in funds classified in the world wide sector where offshore versus local investment limits are not fixed.”

Paine said, as with previous quarters, most of the industry flows went into multi-asset class funds. “Many investors prefer to leave asset selection decisions to a professionally qualified manager. In quarter two, fully 44% of the industry netflows found its way into these funds. Of the 44%, 25% was invested in multi-asset class low equity funds while 10% was invested into income funds. This is a change from what we have seen in previous periods where multi-asset class funds with higher equity allocations were the beneficiaries of most of the flows.

“What we can conclude is that in a low growth, low interest rate environment where economic growth and corporate earnings will be muted, conservative investors should consider moving their capital up the risk spectrum to take advantage of the relatively superior returns from equity investments and longer duration fixed interest assets. We hope this is the case and not investors de-risking.”