South African asset managers attracted investments worth R567.3 billion in the second quarter, but investors also sold investments worth R577.7 billion, resulting in net outflows of R10.4 billion.
This was revealed by the Association for Savings and Investment South Africa (ASISA) in its report on the Collective Investment Scheme (CIS) industry for the second quarter of 2023.
Assets under management grew by 3% from the end of the first quarter of 2023 when assets stood at R3.27 trillion.
Over the 12 months to 30 June 2023, assets grew by 13%, primarily due to strong stock market performance.
Senior policy advisor at ASISA Sunette Mulder said existing investors may have sold out of their investments to alleviate the financial pressure they are currently experiencing.
ASISA revealed that participating CIS management companies attracted new investments worth R567.3 billion in the second quarter of this year.
At the same time, existing investors sold investments worth R577.7 billion, resulting in net outflows of R10.4 billion.
“Given the overall increase in living costs in South Africa, we were not surprised to see investors tapping into their investments,” Mulder said.
However, investors chose to reinvest income declarations – dividends and interest – worth R26.4 billion.
The R26.4 billion reinvestments in the second quarter exceeded the net outflows of R10.4 billion, leaving the industry with an effective net inflow of R16 billion.
At the end of June 2023, 19% of assets under management were held in local equity portfolios, while local interest-bearing portfolios held 30% of assets. Half of all assets remain in local multi-asset portfolios.
South African investors had a choice of 1,805 local portfolios at the end of June 2023, an increase of 16 portfolios from the first quarter of this year.
Mulder noted that local multi-asset portfolios continued regaining popularity with investors in the second quarter.
These portfolios had been the preferred investment vehicles for local unit trust investors and their financial advisers until 2016 when interest-bearing portfolios started attracting the bulk of the net inflows.
Multi-asset portfolios attracted net inflows of R67 billion over the 12 months to the end of June 2023, the highest year-on-year since June 2016.
“Given the uncertain economic outlook, it is unsurprising that investors are opting for multi-asset portfolios designed to deliver a more stable performance than pure equity portfolios by smoothing out market volatility through diversification,” Mulder said.
Local interest-bearing portfolios attracted significant net inflows of R34 billion for the 12 months to the end of June 2023. Money market portfolios received R26.4 billion.
While global equity portfolios outperformed most other categories over one, five and ten years, these portfolios recorded net outflows in three out of four quarters to the end of June 2023.
For the 12 months that ended June 2023, global equity portfolios reported net outflows of R6.7 billion.
The return generated by South African equity portfolios on average over 20 years was 13.7%, followed by multi-asset with 12.3%, and then global equity with 11.3%.
Locally registered foreign portfolios held assets under management of R810 billion at the end of June 2023, compared to R737 billion at the end of March 2023.
These portfolios recorded net outflows of R16.5 billion for the quarter ended June 2023, bringing total net inflows for the year to R17 billion.
Foreign currency unit trust portfolios are denominated in currencies such as the dollar, pound, euro and yen and are offered by foreign unit trust companies.
There are currently 643 foreign currency-denominated portfolios on sale in South Africa.
Hedge Fund Statistics
The South African hedge fund industry ended the second quarter of 2023 with assets under management of R120 billion.
This represents an increase in assets of R7 billion over the six months from the end of December 2022, when assets stood at R113.01 billion.
The number of hedge funds increased from 216 at the end of 2022 to 219 at the end of June 2023.
Mulder reports that the hedge fund industry attracted net inflows of R4.27 billion in the first six months of 2023.