In spite of volatile markets, South Africa’s unit trust industry showed strong growth in 2003, with net inflows doubling to a record R38,9-billion, according to data from the Association of Collective Investments (ACI).
ACI CEO Colin Woodin said on Thursday that local unit trust assets rose by R50,5-billion over the year to stand at R230,3-billion by year-end, and have trebled in the past five years. Announcing the industry year-end statistics, Woodin noted that unit trusts have become the investment vehicle of choice for South African investors.
“The industry has an important role to play not only in meeting the needs of sophisticated investors, but also making available the benefits of unit trusts to the new emerging investors.”
Results for the year ended December show that the industry has produced excellent returns for investors, particularly those who invested in domestic equities where the average fund performance was impressive with a return of 21%
for General Equity against the FTSE/JSE All Share Index’s 16%.
Other top performing sectors in domestic equity were growth funds averaging 27,8%, value 29,7%, small cap 33,7%, industrial 36,4%, financial & industrial 26,2% and flexible property 33,1%.
Inflows in the final quarter of 2003 remained strong, Woodin said, rising R1,7-billion to R13-billion, with the bulk of new investment being earmarked for domestic rather than foreign funds, the latter showing net outflows of R452-million. Most world wide funds and foreign funds saw outflows as the strong rand held back performance: The MSCI index was up 33,8% in dollar terms, but only around 4% in rand terms over the year as against the All Share’s 16% rise.
Domestic flows again went largely to fixed interest (R8,2-billion), but this was below the previous quarter’s R9,2-billion, indicating some switching into equities.
Money market inflows still accounted for the major share (at R5,1-billion), but were down from R7,7-billion in the previous quarter.
According to the ACI, domestic equity funds saw a resurgence of interest with net inflows of nearly R2-billion. The net flows into asset allocation funds (which include funds that meet the retirement fund regulations and where industry fund mangers decide on asset allocation) nearly doubled to R3,3-billion.
Among asset allocation funds, net inflows of R1,5-billion went into targeted absolute and real return funds, while the remainder was invested into the prudential low (R558-million) and medium equity (R495-million) funds, suggesting that many investors still remain risk averse. Flexible property funds had a net R350-million inflow.
The dominant domestic equity sector — general equity — saw a continuation of the encouraging trend last quarter, nearly trebling inflows to R1,4-billion. Other sectors showing strong inflows included value, varied specialist and small cap funds.
In the domestic fixed interest sector, both income and varied specialist funds continued to be popular with inflows of R1,2-billion and R1,4-billion, respectively, while R431-million was invested in bond funds.
The number of funds on offer to investors declined from 482 to 466, and the number of management companies declining to 26 from a peak of 31 in 2000, reflecting industry mergers. – I-Net Bridge