Where South African investors are putting their money

South African investors are pumping money into local multi-asset funds, which have attracted R60.5 billion in net inflows over the past year – the second-highest for a 12-month period on record. 

This was revealed by the Association for Savings and Investment in South Africa (ASISA) in their quarterly update for the third quarter of 2023.  

The local asset management industry attracted net new investments of R9 billion in the third quarter of 2023, while existing investors reinvested income declarations (dividends and interest) worth R30 billion. 

The industry, therefore, had net quarterly inflows of R39 billion.

Despite the net inflows, the industry’s assets under management dropped marginally to R3.34 trillion from R3.36 trillion at the end of the second quarter of 2023.

Sunette Mulder, senior policy advisor at ASISA, said the decline in assets under management can be attributed to market volatility, with the JSE All Share Index dropping 3.5% in the third quarter.

However, over the past year, assets under management grew by 11% from R3.01 trillion to R3.34 trillion. 

At the end of September 2023, half of the assets under management in local portfolios were invested in local multi-asset funds and 31% in South African interest-bearing funds. 

Local equity funds held 18% of assets, and real estate portfolios only 1%.

South African investors had a choice of 1,824 local funds at the end of September 2023, an increase of 19 portfolios from the second quarter of this year.

Investor trends

South African multi-asset funds attracted R60.5 billion in net inflows over the 12 months to the end of September 2023, the second highest year-on-year since September 2016. 

Interest-bearing funds, including money market, short-term and variable-term funds, were very popular with investors, attracting net inflows of R56.2 billion in the third quarter of 2023.

The most popular multi-asset categories were multi-asset income funds, with net inflows of R29.7 billion in the 12 months to the end of September 2023, and local multi-asset high equity portfolios, with net inflows of R20.4 billion.

Mulder noted that global equity funds, on average, reported net outflows of R3 billion over the 12 months to the end of September 2023 despite outperforming most funds over the one-year, five-year, and 10-year periods. 

However, over the 20 years, South African equity funds outperformed, delivering, on average, 13.1% a year.

Offshore focus

Locally registered foreign portfolios held assets under management of R765 billion at the end of September 2023, compared to R810 billion at the end of June 2023. 

These portfolios recorded net outflows of R7.12 billion for the quarter ended September 2023, following the net outflows of R16.5 billion in the second quarter ended June 2023, 

Net outflows for the year totalled R24.6 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. 

These portfolios can only be actively marketed to South African investors if registered with the Financial Sector Conduct Authority. 

Local investors wanting to invest in these portfolios must comply with Reserve Bank regulations and will be using their foreign capital allowance.

There are currently 661 foreign currency-denominated portfolios on sale in South Africa.