Collective investments now hold almost two trillion in assets

There are now 1 327 collective investment schemes in South Africa managing R1.89 trillion in savings – double the amount of five years ago.

Last year, the net inflow of savings into collective investment schemes (mainly unit trust funds and exchange traded funds) was R101 billion, with R18.85 billion coming in during the last three months of 2015, according to the industry body, the Association for Savings & Investment SA (Asisa).

Locally registered foreign funds held assets under management of R364 billion at the end of last year, compared with R283 billion at the end of 2014. These foreign funds recorded net inflows of R2.4 billion during 2015.

Leon Campher, the chief executive of Asisa, says multi-asset funds have undoubtedly become the investment vehicle of choice for the majority of investors and their financial advisers over the past five years. “At the end of 2010, almost half of all assets under management were held in South African interest-bearing portfolios. We now have 51 percent of assets invested in multiasset portfolios,” he says.

Multi-asset funds make it possible to achieve diversification across asset classes within one fund managed by an expert portfolio manager.

Campher says one reason for the move to multi-asset funds may be that financial advisers realise it is better to have professional asset managers making asset allocation decisions rather than themselves.

In 2015, investors committed a total of R58 billion to South African multi-asset funds, with the income sub-category proving the most popular (R17.5 billion), followed by the conservative low-equity sub-category (R16.9 billion).

Campher says that when comparing the local collective investment scheme statistics to global figures, it becomes apparent that South African investors have a very different risk appetite to their international counterparts. Investor preference for multi-asset funds, for example, appears to be unique to South Africa.

Internationally, investors tend to opt predominantly for pure equity funds, which hold 42 percent of all international collective investment scheme assets, followed by bond funds (22 percent), balanced or multi-asset funds (14 percent) and money market funds (13 percent).

In South Africa, multi-asset funds hold 51 percent of assets. Equity funds, including listed property, have 25 percent, money market funds 16 percent and bond funds eight percent.

Campher says that local funds with some equity exposure have, on average, delivered annual returns of nine percent or more per year (net of fees) over five years, 10 years and 20 years to the end of 2015.

“The only way to beat volatility is with an appropriately diversified portfolio, provided you give it a chance over the longer term to help you achieve your investment goals,” Campher says.