Consumers tapped into their unit trusts in the second quarter to cushion themselves against the cost-of-living crisis as interest rates rose to a 14-year high, pushing up debt-servicing costs such home loans.
SA collective investment schemes encountered net outflows of R10.4bn in the April-June period, excluding the reinvestment of dividends, the Association for Savings and Investment SA (Asisa) said on Thursday in its quarterly report.
Senior policy adviser at the industry body Sunette Mulder said unit trust portfolios are designed to give investors easy access to their money. When emergency savings have been depleted, investors are likely to turn to their unit trust investments for financial relief.
“Given the overall increase in living costs in SA, we were not surprised to see investors tapping into their investments,” Mulder said in comments accompanying the report.
The release of the report comes against the backdrop of resurgent increases in international oil prices and a weaker rand, which have pushed up fuel prices and cast a shadow on the outlook for inflation. The Reserve Bank monitors inflation trends before adjusting policy.
The Bank has increased the cost of borrowing by a cumulative 475 basis points (bps) since November 2021, taking the benchmark repo rate to a 14-year high.
Industry trends
Total assets under management rose 3% to R3.36-trillion quarter on quarter if the reinvestment income declaration of R26.4bn is taken into account.
“While income declarations that are reinvested are not considered new money, investors who receive them are given the choice to buy additional units in their existing portfolios instead of withdrawing this money,” explained Mulder.
Measured on a year-on-year basis, assets under management rose 13%, boosted by share market performance.
At the end of June, 19% of assets under management were held in SA equity portfolios, while SA interest-bearing portfolios held 30% of assets. Half of all assets (50%) remained in SA multi-asset portfolios, with the rest in SA real estate portfolios (1%).
SA investors had a choice of 1,805 local collective investment scheme (CIS) portfolios at the end of the reporting period, an increase of 16 from the first quarter of the year.
Mulder said SA multi-asset portfolios continued to regain popularity with investors in the second quarter, holding half of all CIS industry assets under management. SA multi-asset portfolios were the preferred investment vehicles for local unit trust investors and their financial advisers until 2016, when SA interest-bearing portfolios started attracting the bulk of the net inflows.
SA multi-asset portfolios attracted net inflows (including reinvestments) of R67bn year on year, the highest since June 2016.
“Given the current market volatility and an 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.
Locally registered foreign portfolios held assets under management of R810bn, compared with R737bn in the preceding quarter. These portfolios recorded net outflows of R16.5bn for the quarter.
The SA hedge fund industry ended the second quarter with assets under management of R120bn.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.