Investor confidence in South Africa's Collective Investment Schemes (CIS) industry showed a significant recovery in the third quarter of 2024, resulting in net inflows of R5.0 billion from July to September.
This turnaround marks a positive shift following the net outflows experienced in the previous quarter, according to the latest data from the Association for Savings and Investment South Africa (Asisa).
In addition to these inflows, existing investors reinvested R37.3 billion in income declarations, such as dividends and interest, bringing the total net inflows for the quarter to R42.3 billion. Over the 12 months to the end of September 2024, the CIS industry saw R86.0 billion in net inflows.
Asisa's CIS industry statistics for the quarter and year ended September 2024 reveal that assets under management grew by 4.3% during the third quarter, reaching R3.80 trillion compared to R3.64 trillion at the end of June. Year-on-year, assets grew by 13.7%, largely driven by strong stock market performance.
Asisa senior policy advisor Sunette Mulder says following the net outflows of R6 billion (taking into consideration reinvestments of R24 billion) in the second quarter of this year, the third quarter recovery in net inflows was good news. “Towards the end of the second quarter and early in the third quarter, much of the investor anxiety had worked itself out of the system following a solid period of no load-shedding, a peaceful transition to a Government of National Unity, and the well-managed implementation of the two-pot retirement system.”
The data reveals that at the close of September 2024, South African equity portfolios comprised 19% of the CIS assets under management, while 30% was allocated to South African interest-bearing portfolios. The largest portion, 50%, remained in South African multi-asset portfolios, with 1% in South African real estate portfolios.
According to the data, the most popular category among investors over the 12 months to the end of September 2024 was the South African Interest Bearing Short Term category, which attracted R40.7 billion of the R86.0 billion in net inflows. In contrast, the South African Equity General category saw net outflows of R11.3 billion over the same period, though it experienced a small net inflow of R1.9 billion in the third quarter.
Mulder says that the poor performance of equity investments in the short term was not surprising given the prevailing uncertain investment climate. "Unfortunately, this also meant that jittery investors missed out on a solid equity run despite the volatility," she says. The South African Equity General category delivered an average return of 21.8% over the 12 months to the end of September 2024, while the Interest Bearing Short Term category provided an average return of 10.1%.
The data shows that one unexpected highlight was the South African Interest Bearing Variable Term category, which, despite typically low rankings in performance tables, delivered an impressive 24.3% return over the year. However, this category accounted for only 6% of CIS assets under management.
Offshore Focus
The data also reveals a modest increase in assets held by locally registered foreign portfolios, which reached R913 billion by the end of September 2024, up from R899 billion in June and R765 billion a year earlier. These portfolios recorded net inflows of R4.1 billion for the third quarter, reversing the previous quarter’s net outflows of R2.4 billion. However, for the 12 months to September 2024, these portfolios still recorded net outflows of R2.6 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," Asisa noted in its report. "These portfolios can only be actively marketed to South African investors if registered with the Financial Sector Conduct Authority (FSCA). Local investors wishing to invest in these portfolios must comply with Reserve Bank regulations and will be using their foreign capital allowance."
As of September 2024, there were 723 foreign currency-denominated portfolios available to South African investors, the report says.
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