SA’s collective investment schemes (CIS) industry has seen robust growth in assets under management, but investor caution has resulted in significant net outflows as market volatility and political uncertainty drive a “safety-first” approach.
The latest figures from the Association for Savings and Investment SA (Asisa) reveal that the CIS industry managed assets totalling R3.64-trillion by the end of the second quarter of 2024, reflecting a modest 2% growth from the previous quarter.
However, despite this growth in overall assets, the local CIS industry recorded net outflows of R30bn, excluding re-investments, during the second quarter of 2024.
Asisa senior policy advisor Sunette Mulder attributes this trend to market volatility and political uncertainty, particularly in the lead-up to the May election.
Investor jitters led many to withdraw from riskier portfolios, despite consistent long-term performance. Reinvestments of R24bn helped reduce the overall net outflows to R6bn for the quarter, but Mulder said the challenging economic and political environment weighed heavily on investor sentiment.
“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. In addition, we had a nail-biting lead-up to the general elections. The stakes were so high that many investors would have decided to exit the stock market,” Mulder said.
Equity portfolios have historically delivered a strong performance, with an average annual return of 12.8% over the past 20 years, Asisa said.
Even portfolios in the SA multi asset high equity category, which delivered an average annual return of 11.7% over the same period, faced withdrawals as investors turned to less volatile options, particularly SA interest bearing portfolios, which now hold 31% of all assets.
Mulder said the introduction of the two-pot retirement system, which allows individuals more flexibility in managing their retirement savings, may have contributed to asset managers restructuring portfolios.
Optimism is returning, however, as the peaceful transition to a government of national unity at the end of the second quarter, along with improvements in load-shedding, had begun to restore confidence, she said.
The RMB/BER business confidence index, which reached 38 points at the start of September 2024 — its highest level since 2022 — suggested a potential rebound in investor sentiment, Mulder said.
Mulder expects the third-quarter statistics, due in November, to provide a clearer picture of whether this cautious optimism is translating into a more positive investment environment.
Globally, local investors remained wary as foreign currency unit trust portfolios, which are denominated in major currencies such as the dollar and euro, recorded net outflows of R2.4bn in the second quarter, Asisa said. This brought total outflows for the year to R13.8bn, with assets in these portfolios falling to R899bn from R928bn in March.
Meanwhile, SA’s hedge fund industry showed resilience, ending the second quarter with R187bn in assets under management, representing an 11.3% increase from December 2023. Hedge funds attracted net inflows of R2.4bn in the first half of the year, indicating that some investors are still willing to seek returns in more complex, alternative strategies.
Despite the challenging environment, Mulder stressed the importance of maintaining a diversified, long-term investment approach, particularly during periods of uncertainty.
Solid returns were driven by time in the market, not timing the market, she said.
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