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Local CIS industry attracts steady inflows

The past five years has seen a move from interest-bearing to multi-asset portfolios, says Asisa’s Sunette Mulder.

NASTASSIA ARENDSE:  Earlier today I had a conversation with Sunette Mulder, who is a senior policy advisor about the local collective investment schemes [CIS] industry and some of the steady inflows it seems to attract.

SUNETTE MULDER:  For the quarter ended September we found that the total assets have gone up to R2.19 trillion, which is the highest they’ve ever been. We had a strong inflow for the quarter of R38 billion, and that brought our annual flows up to R138 billion for the year.

NASTASSIA ARENDSE:  What was driving the amount of flows?

SUNETTE MULDER:  We were also surprised, with all the turbulent political and economic environmental changes that we’ve experienced the past while. But investors seem to be quite resilient. They still want to invest. The obviously have certain targets that they are investing for. The investor patterns have remained pretty stable over the past five years. On average we’ve found that the quarterly investments tended to be around R35 billion, so to have a flow of R38 billion keeps with that trend.

NASTASSIA ARENDSE:  You say “the change in the industry’s asset composition over the past five years paints an interesting picture”. Take me through the picture that you are seeing. 

SUNETTE MULDER:  What we’ve seen in the past five years is a move from interest-bearing portfolios to more multi-asset portfolios. So if you look at September 2012, we had about 41% invested in interest-bearing, and only 33% in multi assets. That has now moved around to multi asset being 50% of the assets being invested, and interest-bearing sitting at 26%.

NASTASSIA ARENDSE:  You do one thing that I’ve heard a lot of investors or portfolio managers talking about, warning other investors about chasing returns or market timing, the gamble that rarely pays off. Do you find from your perspective that people still do that – chasing high returns and not holding on for too long, that very short selling kind of thing?

SUNETTE MULDER:  Yes. We do try to dissuade people from having that short-term view. These investments are long-term investments by nature. So unfortunately you will still have people trying to chase the returns and find the sectors that are the big winners for the quarter or the six months or the year. We try and say to investors look at it more from a five-year perspective. If you are saving for a specific goal in mind, keep the money, be consistent about it and you will get your returns.

NASTASSIA ARENDSE:  In terms of those who are investing in the CIS industry, are they mostly investors?

SUNETTE MULDER:  It’s a mix. We have a lot of investors coming directly into the CIS industry, so that’ll be people going directly to a unit-trust company to make their investment.

We also have a lot of people investing via advisors.

Then we also have people coming via LISP platforms – the linked investment service provider platforms.

And then we also have those investing into the CIS industry as pension and provident funds, and they contribute quite a sizeable amount to this industry.

NASTASSIA ARENDSE:  The offshore focus – how does that compare in comparison to the CIS industry?

SUNETTE MULDER:  It is completely different. The offshore focus is on offshore funds that are registered by the Financial Services Board to be sold into our market. The assets under management of the offshore funds are sitting at R433 billion, and that has increased from R403 billion as at the end of June. So these funds are foreign-currency unit trusts denominated in currencies such as the dollar, the pound, the euro and the yen, and they are being offered to be sold into our market. So when investors do buy those, they will need to make use of their foreign allowance to buy these funds.

NASTASSIA ARENDSE:  Thanks to Sunette Mulder.

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