Independents take on majors

UNIT TRUSTS: TOP 10 FUNDS STILL DOMINATE

A silent revolution by small, independent funds is transforming the unit trust industry, proliferating choice for investors, in a market still dominated by the majors.

At the end of 2016, more than R2 trillion was invested in South African collective investment schemes, across 1 520 funds. Incredibly, however, more than a quarter of all assets in the industry are held in only ten unit trusts. And more than 10% sits in the largest two.

Tale of the tape

The first table illustrates this heavy concentration of assets.

Together, these ten funds have assets under management of R544.7 billion. The next ten largest hold R201.9 billion. That means that the 20 biggest unit trusts in South Africa have a market share of 37.3%. That leaves 62.7% to the remaining 1 500.

But this concentration has come down in the last five years. At the end of 2011, the ten largest funds alone accounted for 30.4% of assets under management.

There are two factors behind this. The first is the proliferation of new funds. Five years ago, SA had 947 registered collective investment schemes and since then there has been a more than 50% growth. This has created a much bigger tail in the market. Many of these funds are small, but collectively they have diluted the dominance of the biggest funds.

Perhaps the more telling reason, however, is that five years ago there were a few very large money market funds that accounted for a significant portion of industry assets. The five largest of those held a combined market share of 16.2%.

But these funds have failed to attract much new investment since 2011.

The second table shows the ten largest funds in South Africa at the end of 2011.

The largest fund at this point was the Absa Money Market Fund. Five years later, it has grown its assets under management by only R2.8 billion.

The Standard Bank Money Market Fund, which is now the Stanlib Money Market Fund, was the third biggest fund. It is now no longer even in the top 10. Its assets under management have dropped by R7.2 billion.

Major turnaround

By contrast, the Allan Gray Balanced Fund has nearly tripled in size. It has grown its assets under management by R75.4 billion.

The Coronation Balanced Plus Fund’s rate of growth has been even more impressive. It managed only R17.3 billion at the end of 2011, and has grown that more than fourfold to reach its current size of R81.5 billion.