Written by: Candice Paine
Cape Town, 1 February 2012
The tough economic climate was reflected strongly in the
2011 unit trust results released by the Association for
Savings and Investment South Africa (ASISA) today. The
industry had its worst year in six years and saw a 55
percent decline in flows from R101 256 million in 2010 to
R45 424 million in 2011. The size of unit trust market now
stands at R1 011 052 million at the end of 2011 (including
Candice Paine, Head of Retail at Sanlam Investment
Management says that individuals have been
'de-saving' either by spending - quite likely on
needs rather than wants - or paying off debt. Lost
employment would also no doubt have contributed in her
view. "Consumers are increasingly under stress in
terms of their personal money management and they have to
cut back on savings in order to meet more immediate
Corporates, on the other hand, have been deleveraging since
2008 are now looking to spend on capex and emerge from
Paine said that the big surprise in the latest stats was
the R21 153 million outflow from money market funds.
"Money market funds have had inflows of on average
approximately R30 billion per annum over the past five
years. The outflows, therefore, represent a substantial
shift in investor behaviour. It is possible that investors
may have moved some of their money to higher yielding funds
which carry slightly more risk than money market funds, for
instance, income funds (which saw much bigger than usual
annual inflows) and fixed interest varied specialist funds.
But mostly it is likely that the withdrawals from money
market funds have left the industry entirely for the
reasons mentioned earlier."
She said that a strong trend seen over the last few years
had persisted in the latest set of results. "Multi
asset class funds were the biggest recipients of flows as
investors are increasingly opting to choose the level of
risk they are comfortable with and then leaving the asset
allocation decisions to a professional fund manager. This
category includes Balanced Funds, Low Equity Funds and
Targeted Return Funds."
Property funds which have been the darling of income
investors over the past few years saw a dip in netflows
receiving R2 140 million which is a more than 50% drop from
2010. Dividend Income funds, housed in the Fixed Interest
Varied Specialist Category, lost approximately R16 billon
as a result of an impending tax legislation change on their
structures. "However funds offering the opportunity
for investors to receive enhanced yields are still very
Pure equity funds are still not flavour of the month with
specialist funds and value and growth funds being even less
popular than general equity funds - this is further
confirmation of investors leaving asset allocation to
professional fund managers who will not only allocate
capital away from equities when valuations dictate but also
employ protection strategies which give an investor further
peace of mind in times of high volatility.
Paine said that within the global context, emerging market
equities were one of the worst performing asset classes
globally in dollars, with global bonds, surprisingly,
performing the best. "This reflects the risk-off trade
as investors fled to perceived safety and reacted to
newsflow and not valuations."
In terms of international fund flows, the most noteworthy
development was the tapering of netflows into Rand
denominated foreign unit trusts in 2011.
She says that individuals who can afford to continue to
save should do so for as long as possible, but they should
see good advice about where to invest in this market.
"Asset managers are in a difficult spot. The perceived
risk in risky assets is very much higher than safer assets,
but the traditional payoffs aren't aligned. So fixed
interest assets are giving their lowest yields in many
years and the superior returns we've seen from equities
through most of the noughties will take a while to be
replicated owing to the global growth environment.
Investors who are drawing an income from their capital
require a high absolute level of return to draw what they
need and this implies that they need to be taking on more
risk. But with caution."
Paine - under whose watch SIM retail asset under management
increased 84% in just three years - concludes that, despite
the environment, Sanlam Investment's focused retail
strategy had meant that it had one of its best years ever.
The investment cluster was the recipient of over R7 000
million netflows in 2011.
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