Category Investments

Which unit trusts did investors back in 2009?

24 January 2010 Plexus

After the onset of the global credit crisis in mid-2007, 2008 and the start of 2009 were understandably characterised by extremely low levels of investor sentiment and high risk aversion. According to Dr Prieur du Plessis, Plexus group chairman, the result thereof was that unit trust investors moved large sums of money to the so-called safe-haven investments such as money market and fixed interest funds.

The accompanying Graph A depicts the percentage allocation of assets invested in South African rand-denominated unit trusts per sector over time. “The total market value of domestic equity funds, including general equity and all sector-specific equity funds such as value, growth, small cap, industrial and varied specialist funds, declined steadily from mid-2007 up to the end of March 2009,” says Du Plessis. “Obviously this decline can partly be attributed to the decline in equity prices, but Plexus’ research reveals that investors were moving a significant amount of money out of equity funds into funds in the fixed interest sector and into balanced funds, i.e. the asset allocation sector.”

By comparing the quarter-end market values with market movements stripped out, Plexus calculates the implied in- and outflows to and from South African rand denominated unit trust funds, excluding money market funds. The figures reveal that during 2008 domestic equity funds experienced a net outflow of R6,2 billion and foreign equity funds a net outflow of R1,6 billion. Domestic fixed interest funds, on the other hand, were the beneficiaries of a net inflow of R26,7 billion. Foreign fixed interest funds were also out of favour and experienced a net outflow of R2,5 billion.

Du Plessis says that while the trend has turned in 2009, investors have most certainly not regained enough confidence to benefit fully from the significant gains seen in equity prices over the past year. “While the flow to domestic equity funds turned positive during 2009 (see Graph B), investors still preferred the safe-haven status of fixed interest funds and the more stable asset allocation funds,” says Du Plessis. Investors invested almost three times more in fixed interest funds (+R16,2 billion) than in domestic equity funds (+R5,4 billion), while domestic asset allocation funds, especially those in the variable and low equity sectors, enjoyed a bumper year with net inflows of R33,3 billion.

Du Plessis also points out that the largest inflow into domestic equity funds came during the fourth quarter last year (see accompanying Table A). This means investors were only prepared to venture back into the water after the FTSE/JSE All Share Index had already recovered by almost 40% from its 3 March 2009 low to the end of September 2009. “Investor psyche never changes – no one wants to buy when doom and gloom prevail, even though great value is staring you in the face,” says Du Plessis.

Is it too late to invest in the equity market now? Du Plessis believes equities still offer the best return potential over the next few years. “Domestic equities are close to fairly priced at present, but the easy money has been made and stock selection is becoming increasingly important. There are still risks out there as any new shocks to the global financial system or earnings disappointments may result in a pull-back from current levels. I would advise investors to phase money into the equity market over the next few months rather than invest a lump sum,” he says.

Graph A

 (Click on image to enlarge)

Graph B

 (Click on image to enlarge)

Table A



First Quarter

Second Quarter

Third Quarter

Fourth Quarter


Domestic Asset Allocation

5 224,58

5 691,91

11 232,57

11 171,23

33 320,29

Domestic Fixed Interest

1 429,71

7 967,03

2 036,84

4 776,38

16 209,97

Domestic Equity

1 821,06


-2 118,88

4 878,65

5 413,93

Foreign Equity






Foreign Fixed Interest






Foreign Asset Allocation






Domestic Real Estate






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