Volatility pulls CIS industry assets back to below R3trn

Turbulent stock markets over the past year have pulled local collective investment schemes (CIS) assets under management (AuM) to below the R3 trillion threshold – despite the industry reporting positive net inflows in the second quarter.

According to the Association for Savings and Investment South Africa (Asisa), AuM at the end of June came in at R2.98 trillion, considerably lower than the R3.09 trillion reported at the end of March.

The drop in assets comes even though the industry reported net inflows of R21 billion for the second quarter and total net inflows for the year ended June 2022 of R110 billion.

“The FTSE/JSE All Share Index [Alsi] took a hammering in June, which resulted in an 8% drop for the month,” Asisa senior policy advisor Sunette Mulder says in a statement.

“Looking at the quarter, the JSE Alsi was down by 11.69%, while in rand terms the FTSE 100 was down 0.46% and the S&P 500 dropped by 5.94%.

“All in all not a good quarter for equities,” says Mulder. 

By the end of June, 19% of AuM were held in SA equity portfolios, while a further 31% were in SA interest-bearing portfolios. SA multi-asset portfolios accounted for 48% of all assets and SA real estate portfolios held just 2%. 

Asisa data further shows that investors are becoming more involved in investment decisions, with a reported 23% of inflows in the past year coming directly from investors, while intermediaries contributed 26% of new inflows. Linked investment service providers (Lisps) and institutional investors generated 34% and 17% of sales over the last year.

“This does not mean that these investors acted without advice,” says Mulder. “A number of direct investors pay for advice and then implement the investment decisions themselves.”

Read: Assets of SA collective investment schemes stay above R3trn threshold

Investor appetite

Industry data shows a growing appetite among investors for SA multi-asset and SA interest-bearing portfolios, and a move away from SA equity general portfolios. 

This is despite equity general portfolios keeping up with inflation over the past year, delivering a return – net of fees – of 6.6% in comparison with inflation of 6.5%, and further outperforming inflation over the longer term.

In contrast, SA multi-asset high equity and low equity portfolios on average struggled to keep up with inflation in the 12-month period, but did  manage to keep up with equity portfolio performance over the long term. 

The SA multi-asset category raked in a record R66 billion in net inflows over the 12-month period, the highest it has managed in six years.

The SA interest-bearing category (variable term and short term) brought in R24 billion in net inflows. During the same period the SA equity general category recorded R7 billion, while the SA money market category recorded net outflows of R2o billion in the year to end-June. 

Mulder adds that investor appetite for SA multi-asset portfolios has been waning in recent years, but started regaining popularity over the past 12 months “and this trend continued into the second quarter”.

Read: Should I stay invested?

Offshore and hedge funds

The last year has seen locally registered foreign portfolios accounting for R638 billion worth of AuM. For the quarter ended June, foreign portfolios reported R15.6 billion in net inflows while an annual review has seen total net inflows at R23.5 billion. 

At the end of the second quarter, the South African hedge fund industry had R104.54 billion worth of assets under management, R17.71 billion more than reported in December 2021. The hedge fund industry brought in R1.95 billion in net inflows in the first half of the year.

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