Strong regulation and transparency in the local financial market is ramping up investor confidence in South Africa’s Collective Investment Schemes or unit trusts, an industry body says, after the sector attracted net inflows of R47bn ($5.2bn) in the first quarter of 2013 – the second biggest quarterly net inflows ever.
Peter Blohm, senior advisor at the Association for Savings and Investment South Africa, says investor confidence in unit trusts was on the up. “After the financial crisis investors were a little reticent,” he says, “but they seem to have got their confidence back. We have a well regulated industry, the products are transparent, and investors I think feel comfortable with the product.”The third quarter of 2012 saw record inflows of R63bn ; that was followed by R41bn in the fourth quarter of 2012. The year ended in March produced the biggest every inflows for a rolling 12-month period, of R166b.
According to the ASISA, the CIS sector managed assets of R1.28tn and offered investors 988 funds in December 2013. By comparison, total assets under management a year earlier stood at R1.20tn.
So, how was the money spread? Investors continued to favour funds in the South African Multi Asset category (previously Domestic Asset Allocation). This from an ASISA statement:
At the end of March 2013, this category held 44 per cent of industry assets (excluding Worldwide, Global and Regional sectors). In the first quarter of this year SA Multi Asset funds attracted R26.2 billion in net inflows. In terms of ASISA’s new Fund Classification Standard for South African Collective Investment Portfolios, the SA Multi Asset category is made up of the following sub-categories: the new Income sub-category, Low Equity, Medium Equity, High Equity (previously Prudential Variable Equity), and Flexible.
Leon Campher, ASISA’s chief executive, says the bulk of inflows in the 12 months to the end of March came either directly from investors (27 per cent) or were channelled via intermediaries (35 per cent). This means that more than 60 per cent of inflows consisted of retail money.
“We have found in the past that retail investors in particular very often mistimed the market,” Blohm says. “They would climb into equities when equities were reaching a peak and then after a fall they would then get out and miss the next up-turn.”
Blohm says this has encouraged retail investors to go for managed portfolios. “Our fund managers have proven over time that they are pretty good at managing the assets that they are entrusted with.”
ASISA said locally registered foreign funds held assets under management of R164.2bn at the end of March, up from R143bn at the end of December. It said growth was due to depreciation of the rand against the US dollar and occurred despite net outflows of R300m in the first quarter.
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