A solid Q1 for local schemes

The local collective investment schemes (CIS) industry reported strong net inflows of R52.8 billion in the first quarter of 2019 – the third highest quarterly net inflows in five years.

According to the Association for Savings and Investment SA’s (Asisa) CIS industry statistics for the quarter and year ended March 2019, this brings to R143.3 billion the total net inflows for the 12 months.

Year-on-year, the local CIS industry also delivered a steady growth in assets under management. At end March, total assets stood at R2.38 trillion, compared with R2.18 trillion at end March 2018 and R2.24 trillion at end 2018.

Half of these assets are held in South African multi-asset portfolios (50%), followed by SA interest-bearing portfolios (28%), SA equity portfolios (19%), and SA real estate portfolios (3%). At end March 2019, local investors had a choice of 1 599 portfolios.

Investor trends

SA’s interest-bearing short-term portfolios attracted the bulk of net inflows (R39.7 billion) in the 12 months to end March 2019, while SA interest-bearing money market portfolios received R32.8 billion, and SA multi-asset income portfolios R26.6 billion.

While the majority of investors continued to favour the perceived safety of interest-bearing portfolios, a number of investors were prepared to brave market volatility for the potential of higher returns offered by equity portfolios over the long term. South Africa’s multi-asset high equity portfolios attracted net inflows of R24.3 billion and equity general portfolios R13 billion.

Local portfolios with high equity exposure have on average outperformed (net of fees) interest-bearing portfolios over the long term. Over the one- and fiveyear periods to end March 2019, however, interest-bearing portfolios outperformed equities.

Where did inflows come from?

Twenty-eight percent of the inflows into the CIS industry in the 12 months came directly from investors. However, this doesn’t mean these investors acted without advice. We believe a number of direct investors pay for advice, then directly implement the choice of portfolio.

Locally registered foreign portfolios held assets under management of R477 billion at end March. These recorded net inflows of R0.98 billion over the quarter.

Sunette Mulder is Asisa’s senior policy advisor

Investors and businesses crave policy certainty and a state that gets the basics right. Many investors and business people saw the election as a do-or-die situation where President Cyril Ramaphosa had to get a sizable majority for the ANC to implement his reform agenda.

For the ANC to have secured 57% of the votes is therefore good for markets. Regarding parties with more radical platforms, their overall share of the vote should comfort investors that the electorate’s appetite for extreme policy changes appears limited.

Change takes time

The ANC’s highest decision-making body, the national executive council, was elected in December 2017 and will remain in place until the 2022 elective conference. It’s unlikely the party will agree to fundamental shifts in economic policy, but tweaks are likely.