Unit trust investors favour interest-bearing funds

THE LOCAL collective investment schemes industry attracted healthy net inflows of R134.5 billion in 2017, ending the year with assets under management of R2.25 trillion.

The annual collective investment industry statistics for 2017, released this week by the Association for Savings & Investment South Africa (Asisa), show that most of the inflows went into interest-bearing portfolios. Funds in the South African interest-bearing short-term sub-category recorded net inflows of R40.2bn in 2017, money market funds R26.8bn, and South African multi-asset income funds R21.2bn.

Sunette Mulder, the senior policy adviser at Asisa, says judging from the 2017 statistics, already-cautious investors seem to have retreated from low- and medium-equity portfolios to the perceived safety of interest-bearing portfolios.

More resilient investors, on the other hand, sought the potential of higher returns typically offered by equity funds. South African multiasset high-equity funds attracted net inflows in 2017 of R20.4bn and South African equity general portfolios R13.3bn.

Mulder says that portfolios with high equity exposure, on average, consistently outperformed (net of fees) interest-bearing portfolios over one year, five years, 10 years and 20 years to the end of December 2017.

The net inflow figure is the difference between the total amount of money invested into funds over a specific period minus repurchases (when units are sold).

The 2017 net inflows of R134.5bn were made up of new investments and income distributions reinvested by investors.

Mulder says 28% of the inflows in 2017 came directly from investors – down by 3% from 2016. However, this does not mean that these investors acted without advice, she says. Intermediaries contributed 30% of new inflows, compared with 22% in 2016. Linked-investment services providers generated 22% of sales (20% in 2016) and institutional investors, such as pension and provident funds, contributed 20% (27% in 2016).

At the end of December 2017, South African investors had a choice of 1 626 domestic funds – an increase of 106 funds from the previous year. There are also 433 locally registered foreign funds available to South African investors. These foreign funds recorded net inflows of R5.9bn over the 12 months to the end of 2017. – Staff Reporter