INVESTOR’S NOTEBOOK STEPHEN CRANSTON
Why doesn’t the Association for Savings & Investment SA ever release debit order statistics for unit trusts? It doesn’t have a problem releasing the equivalent numbers for the life industry, namely recurring premium statistics. We could then work out an annual premium equivalent for unit trusts, with 10% of lump sums and 100% of debit orders counted towards the total. Unit trusts were designed for the regular debit order investor, as a way to get convenient access to the JSE. But now it is dominated by financial advisers, dealing only in large lump sum business. Even the emerging wealthy are largely ignored by financial advisers as they do not have enough spare cash to make a serious lump sum investment.
Most mortals get the chance to make a big lump sum investment only when they buy a pension out of their annuity. So it is no surprise that balanced or multi-asset funds continue to dominate. For advisers you might expect the default to be a cheap tracker fund, but in fact they default to the most popular brand names in the industry. It is known as the Fica approach after the four houses that are cleaning up: Foord, Investec, Coronation and Allan Gray. An associate member of this group is Prudential, which now has a bestseller in the R32bn Inflation Plus Fund. Allan Gray has the largest fund in the industry — its balanced fund, which has R106bn under management — Coronation Balanced Plus has R74bn, Foord Balanced R46bn and Investec Opportunity R35bn. Allan Gray, which arguably has ridiculously cumbersome funds, seems to be the most fragile member of the group. It experienced an outflow of just over R2,2bn over three months. In fact, since June 2010, its unit trust assets have doubled, which does not compare well with the six-fold rise in Coronation’s funds, the 13-fold increase at PSG and 15-fold increase from Foord.
One of the features of the past year has been the extraordinary turnaround in the fortunes of equity funds. The general equity sector has received R26,4bn of new funds, beating even the low-equity multi-asset sector (R17,7bn) and high equity (R16,8bn). Sadly, the specialist equity sectors continue to dwindle to irrelevance. In the September quarter large-cap funds lost R485m, mid and small-cap funds R316m. There is still only one general equity fund in the top 10 funds, namely Allan Gray Equity, but over the next few years perhaps that will change if funds such as Nedgroup Investment Rainmaker and Old Mutual Investors capture the public’s imagination.
In the past year there has been a pullback from fixed income funds, with bond funds (known as variable term) shedding R2,5bn and income funds (short term) R1,1bn. Remember that many of the exciting fixed income funds that were in the variable category, such as Coronation Strategic Income, now sit in the multi-asset income category. There has been some return to the money market category, which suffered from panic withdrawals after the collapse of Abil. About R10bn came back to the category, making barely a dent after R36bn was withdrawn in the previous year. It is intriguing to see how the shape of the industry has changed over the past five years. Retirement planning has become so dominant that it is no wonder that the multi-asset share has increased from 25% to 50%.
It is perhaps a little surprising why, if investors chase high returns, the real estate sector has not grown faster. It still accounts for just 4% of industry assets. Equity unit trust’s share has barely moved from 22% to 21%. In contrast, the interest-bearing assets have collapsed from 50% to 25% with money market’s share down from 31% to 16% and bonds hardly getting traction, increasing from 2% to 3%.