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Cape Town - While assets under management in the local Collective Investment Schemes (CIS) industry have almost doubled over the past five years, the industry has also witnessed a massive shift in where investors are placing their money.
Investors had almost R1.9trn invested with the local Collective Investment Schemes (CIS) industry at the end of December 2015. This represents an increase of around R200bn from the R1.7trn in assets under management at the end of 2014.
The CIS industry statistics for 2015, released by the Association for Savings and Investment South Africa (Asisa), also show that the local CIS industry attracted net inflows of R101bn in 2015, only slightly less than the R109bn recorded in the previous year.
Leon Campher, CEO of Asisa, said this was achieved in a tough environment marked by economic turmoil, political uncertainty and local and international market volatility.
Investment vehicle of choice
Campher said SA Multi Asset portfolios have become the investment vehicle of choice for the majority of investors and their financial advisers over the past five years.
“While at the end of December 2010 almost half of all assets under management were held in SA Interest Bearing portfolios, we now have 51% of assets invested in Multi Asset portfolios,” he said.
Multi Asset portfolios make it possible to achieve diversification across asset classes within one fund managed by an expert portfolio manager.
In 2015, investors committed a total of R58bn to SA Multi Asset portfolios, with the income sub-category proving the most popular (R17.5bn), followed by Low Equity (R16.9bn).
SA Interest Bearing Money Market portfolios attracted net inflows of R22bn in the 12 months ended December 2015. SA Equity portfolios recorded net inflows of R8bn, while SA Interest Bearing portfolios suffered net outflows of R19bn.
Global perspective
Campher said South African investors have a very different risk appetite to their international counterparts. Investor preference for Multi Asset portfolios, for example, appears to be unique to South Africa.
Internationally, investors tend to opt predominantly for equity portfolios (42% of all international CIS assets), followed by bond portfolios (22%), balanced portfolios – known as Multi Asset portfolios in SA - (14%) and then money market portfolios (13%).
In South Africa Multi Asset portfolios hold 51% of assets, equity portfolios - including real estate - 25%, money market portfolios 16%, and bond portfolios 8%.
Worldwide, there are 101 967 collective investment scheme portfolios with total assets under management of $36.1trn as at the end of September 2015. At the end of December 2015, South African investors had a choice of 1 327 portfolios – an increase of 156 portfolios from the previous year.
Time in the market
Campher said, while the majority of South African investors remain wary of equity exposure, portfolios with some general equity exposure have on average delivered annual returns of 9% or more per year (net of fees) over five years, 10 years and 20 years to the end of December 2015.
“This proves that it is time in the market that delivers solid returns over the long-term and not timing the market. The only way to beat volatility is with an appropriately diversified portfolio, provided you give it a chance over the longer term to help you achieve your investment goals,” said Campher.
Who invested?
Campher said 32% of the inflows into the CIS industry in the 12 months to the end of December 2015 came directly from investors – down by 1% from 2014. He pointed out, however, that this does not mean that these investors acted without advice.
“We believe that a number of direct investors pay for advice and then make their choice of portfolio,” said Campher.
Intermediaries contributed 20% of new inflows, compared to 22% in 2014. Linked investment services providers (Lisps) generated 24% of sales (22% in 2014) and institutional investors like pension and provident funds contributed 24% (23% in 2014).
Offshore focus
Locally registered foreign portfolios held assets under management of R364bn at the end of December 2015, compared to R283bn at the end of December 2014. These foreign portfolios recorded net inflows of R2.4bn over the 12 months to the end of 2015. There are currently 370 foreign currency denominated portfolios on sale in South Africa.
