Multi-as­set port­fo­lios the in­vest­ment ve­hi­cle of choice

We look back at these ve­hi­cles’ per­for­mance and re­mem­ber a pi­o­neer of the lo­cal in­vest­ment in­dus­try.

Finweek English Edition - - FUNDFOCUS -


South Africa faces sev­eral enor­mous eco­nomic chal­lenges at present, note­wor­thy is that the lo­cal col­lec­tive in­vest­ment schemes in­dus­try (unit trusts) has had more to crow about on a trend ba­sis than its usu­ally more ro­bust US coun­ter­part.

The lo­cal in­dus­try at­tracted net flows of R26bn in the first quar­ter of this year, bring­ing to­tal in­flows in the 12 months to March to R111bn, the third high­est in five years. To­tal as­sets un­der man­age­ment are cur­rently around R1.92tr.

The bulk of the lat­est in­flows (R72bn) found its way into SA multi-as­set port­fo­lios, ac­cord­ing to As­so­ci­a­tion for Sav­ings and In­vest­ment South Africa (Asisa) CEO Leon Cam­pher. In­ter­est-bear­ing mon­ey­mar­ket port­fo­lios at­tracted R35bn (mainly in­sti­tu­tional and cor­po­rate money), while do­mes­tic eq­uity port­fo­lios at­tracted R3bn.

Five years ago multi-as­set port­fo­lios con­sti­tuted only 25% of to­tal as­sets un­der man­age­ment; to­day the fig­ure is slightly more than half at 51%. In­ter­est-bear­ing as­sets mean­while dropped from 50% in 2011 to 24% in March.

Multi-as­set port­fo­lios achieved an av­er­age re­turn of 5.8% net of fees in the year to March, con­sid­er­ably bet­ter than eq­ui­ties’ 0.7%.

Their av­er­age an­nual re­turn dur­ing the past five years was 11.6% for high-eq­uity port­fo­lios, and 9.9% for low-eq­uity port­fo­lios. The cor­re­spond­ing re­turn for eq­ui­ties was 11.8%. In­fla­tion (CPI) has av­er­aged 5.8% dur­ing this pe­riod.


There is no doubt that multi-as­set funds play an equally im­por­tant role for in­vestors seek­ing off­shore ex­po­sure, but it hasn’t been easy for many of them this year.

Con­cerns have been rife in re­gard to both bond and eq­uity mar­kets with the on­go­ing im­pact of ul­tra-loose mon­e­tary poli­cies in the form of very low in­ter­est rates and quan­ti­ta­tive eas­ing.

This in­deed is one rea­son why US in­vestors re­cently pulled money from global eq­uity funds at their fastest pace since 2011.

Re­demp­tions from unit trusts hit nearly $90bn in the first quar­ter as port­fo­lio man­agers strug­gled to nav­i­gate the mar­ket. Some $7.4bn was with­drawn in one week alone dur­ing May.

These with­drawals, ac­cord­ing to the Fi­nan­cial Times, have un­der­lined fears over growth in Ja­pan and the eu­ro­zone, as well as ques­tions over US com­pa­nies’ abil­i­ties to weather a frag­ile eco­nomic back­drop. The mar­ket has also been plagued this year by the volatil­ity in the oil mar­ket, fears of a hard Chi­nese land­ing, and talk of re­ces­sion in the US.

Of course, bonds are the main area of worry as many be­lieve that with an im­mi­nent rise in in­ter­est rates in the US and yields at his­tor­i­cally low lev­els, we’ll see the end of a multi-decade rally in this as­set class.

John Stop­ford, co-head of In­vestec multi-as­set in Lon­don, has tar­geted more growthori­en­tated as­sets within his port­fo­lios such as eq­ui­ties, high­yield cor­po­rate bonds, emerg­ing-mar­ket debt and prop­erty over de­fen­sive se­cu­ri­ties like govern­ment bonds and cash.

The Dow Jones In­dus­trial Av­er­age de­liv­ered a to­tal re­turn of 2.2% in the first quar­ter, while the broader S&P 500 In­dex rose 1.35%. The tech­nol­ogy-laden Nas­daq Com­pos­ite In­dex fell by 2.75%. The MSCI World In­dex, a proxy for global eq­ui­ties, lost 0.35%. Emerg­ing mar­kets were no­table out­per­form­ers for the pe­riod, with the MSCI Emerg­ing Mar­ket In­dex ad­vanc­ing 5.71%.

Says has been no ex­cep­tion. It all re­volves around the con­sumer who makes up 69% of GDP. If you want to know where the US econ­omy is go­ing, look to con­sumer spend­ing and in­vest­ment in hous­ing.”

Re­mem­ber­ing an in­dus­try trail­blazer

Last month we saw the pass­ing, sadly, of Louis Shill, co-founder with Don­ald Gor­don of the Lib­erty Group (1964-65), founder and chief ex­ec­u­tive of the for­mer Sage Group (1969-2003), and a prom­i­nent pi­o­neer of the South African unit trust in­dus­try. He was born in Wit­bank in 1930. Ac­cord­ing to for­mer prom­i­nent fi­nan­cial writer, Ken Ro­main, Gor­don and Shill vis­ited the US in the 1960s, and, upon see­ing the po­ten­tial to link life in­sur­ance poli­cies to unit trusts, were in­spired to cre­ate eq­uity-linked poli­cies that pro­vided a hedge against in­fla­tion. They in­tro­duced this into SA and it proved a ground­break­ing devel­op­ment.

Says Shill’s long-term col­league, Bernie Nackan: “This rev­o­lu­tionised life in­sur­ance world­wide as in­sur­ers were drawn to the ben­e­fits of lower cap­i­tal re­quire­ments, trans­par­ent per­for­mance to linked mar­kets, and the abil­ity to counter ris­ing in­fla­tion.”

Shill in­tro­duced SA’s first unit trust, Sage Fund, in 1965, and as re­cently as the early 2000s it con­sis­tently pro­duced com­pound re­turns well in ex­cess of 15%.

Shill was also a past chair­man of the Life Of­fices As­so­ci­a­tion (LOA); a mem­ber of the govern­ment’s Stand­ing Ad­vi­sory Com­mit­tee on the Long Term In­sur­ance In­dus­try; served in Pres­i­dent FW de Klerk’s Cabi­net as min­is­ter of na­tional hous­ing and pub­lic works; and was a founder di­rec­tor of the Absa Group. Not least, he was a great sup­porter of

and was par­tic­u­larly gen­er­ous in

Rian le Roux Chief econ­o­mist at Old Mu­tual In­vest­ment Group

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