South African asset management industry hits new high

South Africa’s asset management industry is at a record high, with R3.64 trillion in assets under management at the end of the second quarter of 2024. 

This represents growth of 2% from the end of the first quarter and 8.3% over the past year, driven mainly by the strong performance of the JSE and local government bonds. 

The Association for Savings and Investment South Africa (ASISA), revealed this in its update on Collective Investment Schemes (CIS) for the second quarter of 2024. 

Despite delivering consistent and steady growth in assets under management, the local CIS industry recorded net outflows of R30 billion (excluding reinvestments) in the second quarter of this year.

Reinvestments of R24 billion made by existing investors who chose to reinvest dividends and interest reduced net outflows to R6 billion for the three months to the end of June 2024.

Senior policy advisor at ASISA, Sunette Mulder, said that while portfolio restructuring by asset managers contributed to the outflows, the overall investment climate was not favourable for investor confidence.

“The respite in load-shedding only came at the end of the first quarter of 2024, and investors would have continued to take a wait-and-see approach before trusting that the remedial action was sustainable,” she said. 

The second quarter also saw elevated political uncertainty regarding the national elections at the end of May. 

This would not only have resulted in a wait-and-see approach but also driven some investors to exit their investments. 

The transition to a Government of National Unity (GNU)  at the end of the second quarter, combined with a quarter of no load-shedding, has already resulted in cautious optimism. 

This has driven the strong performance of the JSE since the end of May and seen local bonds appreciate meaningfully as well. 

“The third quarter CIS industry statistics expected in early November will show whether investor confidence has been sustainably buoyed.” 

At the end of June 2024, 18% of assets under management were held in South African Equity portfolios, while SA interest-bearing portfolios held 31% of assets. 

Half of all assets remain in South African multi-asset portfolios, with the rest in real estate-only portfolios. 

Asset managers have looked to new avenues to drive growth amid a deteriorating investment climate, with some looking to tap cash-flush corporates. 

Many South African companies have been hesitant to commit capital to new projects, with billions of rands in cash just sitting on their balance sheets. 

Asset managers have recently begun competing for this cash, with Stanlib launching a fund specifically targeting corporate treasuries late last year. 

Earlier this year, Old Mutual drove its institutional money market fund as an easy way for corporates to earn relatively good returns on their cash holdings while retaining liquidity to use this cash if needed. 

Old Mutual has been late to the party but believes it has a competitive edge due to its operational efficiencies and product structure. 

Sean Segar, co-head of Old Mutual cash and liquidity solutions, explained that the insurer aims to offer corporates the liquidity of call accounts with fixed deposit yields.  

All four Old Mutual Cash and Liquidity funds are managed by its subsidiary, Futuregrowth Asset Management, with R200 billion under management.

“After decades in service to corporates, liquidity is a top priority, with corporates expecting to access their investment as easily as withdrawing against a call account,” the other co-head, Ian Ferguson, said. 

Ferguson explained that managing such a fund in South Africa is extremely difficult given the lack of viable investments in this area. 

This also makes outperformance very rare as most debt is issued by the government or guaranteed by the state, with slim pickings with regard to corporate debt.