Which SA unit trusts are attracting the most money?

Patrick Cairns Moneyweb

The poor market returns in South Africa since mid-2014 have had a clear impact on investor appetite.

The Association for Savings and Investment SA (Asisa) figures show net flows into local collective investment schemes – unit trusts, exchange-traded funds (ETFs), and regulated hedge funds – have slowed substantially over the last four years. New investments have fallen to less than half of where they were in 2014.

“Pre-2014, as an industry we’re enjoying a new flow rate of about 10% per annum,” says Thabo Khojane, Investec Asset Management managing director and Asisa deputy chair. “Since then, we have seen a depressed net flow rate.”

The depressed level of new investments coincides clearly with the JSE’s lower investment returns. Although the year to June 2018 produced a decent market return, this was generated by a small group of stocks.

Khojane believes the equity market won’t underperform bonds forever. “When that normalises, we should hopefully go back to a 10% net flow rate as an industry.”

Funds receiving flows

Of South Africa’s 20 largest funds, equity general funds have been most impacted by this negative sentiment.

The Allan Gray Equity Fund and Coronation Top 20 Fund have both experienced substantial outflows over the last three years.

Multi-asset low equity funds have also fallen somewhat out of favour. The Coronation Balanced Defensive Fund and Nedgroup Investments Stable Fund have both seen large outflows, although the Prudential Inflation Plus Fund has been slightly less affected and the Allan Gray Stable Fund has managed to attract net inflows.

Given their scale, Khojane believes what has happened within these funds is a good proxy for trends across the industry.

In that sense, there has been a clear preference for multi-asset income funds. The Prescient Income Provider Fund, Stanlib In- come Fund and Coronation Strategic Income Fund have all seen positive flows.

The table above shows the Prescient Income Provider Fund has seen the highest net inflow over the last three years. The Stanlib Income Fund is fourth.

Khojane is not surprised by this, as multi-asset income funds have generated a net return of 2% to 3% ahead of inflation. However, he notes that over time, multi-asset equity funds should outperform multi-asset income funds.

Investors have continued to place large amounts of money in multi-asset high income funds.

Note, the Nedgroup Investments Core Diversified Fund: its performance suggests investor appetite for passive balanced funds is growing.

Pre-2014, the industry was enjoying a new flow rate of about 10% per year. Since then, we have seen a depressed net flow rate.

Thabo Khojane Deputy chairperson of Asisa