Seed Weekly - Fund Flows

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Tuesday, 16 February 2016 - 20:00

Saving and investment is a topical issue, both from a regulation and a personal goal perspective. Regulators are trying to put measures in place encourage individuals to save more as South Africa’s saving rates have been branded poor by global standards. Individuals are more cognisant of the importance of saving and investment, not to be ready for a rainy day, but also to achieve personal goals and attaining financial freedom. Collective Investment Schemes (CIS) are centre to this as they provide an important vehicle for investors to save.

We explore South Africa’s fiercely competitive CIS industry, focusing on the trend in fund flows. It is logical to assume that good performance is rewarded by inflows although financial economics argues that performance may not necessarily be persistent. In fact, it is well known that past performance does not guarantee future performance.

Historically, industry performance awards have been dominated by the largest players in the industry. However, recent trends suggest a shifting landscape in the industry with boutique managers receiving a lot more recognition. Investors tend to favour the “tried and tested” managers, which supports the managers that have been in the industry for longer. However, consistent good performance does not go unnoticed.

Recent trends

Chart 1: Growth in Local CIS Industry

The local Collective Investment Schemes (CIS) industry attracted inflows amounting to R109 billion in 2015 according to industry statistics released by the Association for Savings and Investment South Africa (ASISA). Multi-Asset investment portfolios, due to their greater diversification are unquestionably the preferred investment vehicle. Of the R1.9 trillion invested with the CIS industry, 51% is invested in Multi-Asset portfolios. Investors committed a total of R58 billion during the course of 2015, with the Income subcategory proving the most popular, followed by Low Equity category as investors exercised risk averseness.

Remarkably, on a global scale, single asset portfolios are more popular. $36 trillion is invested in CIS portfolios and of this, Equity portfolios (including property) form the bulk (42%), followed by Bond and then Multi-Asset portfolios (22% and 14% respectively). Locally registered foreign portfolios held assets under management of R364 billion at the end of December 2015, compared to R283 billion at the end of December 2014 and recorded net inflows of R2.4 billion over the 12 months to the end of 2015.

Large Managers

Chart 2: South Africa’s largest Managers (R’ million)

Assessing the net flows data from Morningstar paints an interesting picture for the largest Managers. The managers’ experienced net outflows, save for Nedgroup Investments that gained R15 billion in assets. Nedgroup Investments was a bigger winner at the recent Raging Bull awards, winning 5 category awards and the coveted, Management Company of the year. Their strategy to allocate management of specific mandates to different manages including boutiques seems to be working well. Boutique managers also won handsomely at the awards and as can be seen in the next section, good performing funds like the Rezco Value Trend Fund, are getting rewarded with net inflows for their good performance.

Popular Funds

Chart 3: Estimated net flows as at 31 December 2015

Ranking the local CIS funds by 2015 net flows, gives results consistent with the notion that Multi-Asset portfolios are the preferred investment vehicle. The Rezco Value Trend Fund and Nedgroup Investment Opportunity Fund managed by Rezco and Abax respectively provide testimony to the growing popularity of funds managed by boutiques. The outperformance by boutique managers relative to their more accomplished counterparts is one of the reasons why they are gaining greater recognition.

As a reminder, it is important for one to have specific savings and investment goals. Matching return objectives, risk appetite and tolerance will help in determining which investments are appropriate for you. Multi-managers like Seed, offer solutions diversifying risk across different managers/funds/strategies to help you achieve your goals. Speak to your financial adviser to get more insight and work on attaining your investment targets.

Kind regards,

Tawanda Mushore

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Tue, 16 Feb 2016

Local markets The JSE ended 0.93% lower on Tuesday, with losses led by resource and financial shares. Full story

South African short-term insurer Santam said on Tuesday it expects to post increased full-year profits, partly due to improved sales, sending its shares higher. The unit of long-term insurer Sanlam flagged a rise of up to 30 percent in headline earnings per share (EPS) to 1,880 cen Full story

Turkey is asking allies including the United States to take part in a joint ground operation in Syria, as a Moscow-backed government advance nears its borders, raising the possibility of direct confrontation between the NATO member and Russia. Full story

Austria will introduce quotas to limit the flow of migrants onto its territory and is preparing crowd-control measures at up to a dozen additional crossings in case a bottleneck prompts a shift in peoples' movements, it said on Tuesday. Full story

Former U.N. Secretary-General Boutros Boutros-Ghali, whose term was marked by war in the former Yugoslavia, famine and genocide in Africa and confrontation with the United States, died on Tuesday. He was 93. Full story

Net selling of Japanese cash stocks by foreign investors hit a near five-month high in the week of Feb. 1-5, exchange data showed, as a stronger yen and worries about a global economic slowdown threatened to erode exporters' profits.. . . Full story

South Africa's worst drought on record risks tipping an already weak economy into recession as rising agricultural imports feed into rising. . . Full story

Diamond mining giant De Beers Group plans to cut 366 jobs in South Africa, the Solidarity trade union said on Tuesday.. . . Full story

South Africa's Woolworths expects an announcement on personal tax hikes in next week's national budget, the retailer's chief executive said on. . . Full story

South Africa's rand was weaker in early trade on Tuesday, giving up some of the gains triggered by the easing of. . . Full story

South Africa's Tiger Brands said on Tuesday sales edged up slightly in the four months to end-Jan but warned that the weakness in the rand would raise input costs.. . . Full story

WestconGroup, a subsidiary of Datatec Limited, will be hosting analyst and investor presentations on 17 and 18 February 2016 in Johannesburg. . . Full story

The board of directors of Trustco wishes to inform shareholders that Ms Amanda Bruyns has been appointed as Company Secretary with. . . Full story

Shareholders are advised that Santam expects its headline earnings per share (HEPS) for the year ended 31 December 2015 to be. . . Full story

The group achieved a 7% increase in turnover from continuing operations in the four month period ended 31 January 2016, compared. . . Full story

Shareholders are advised that Spur is expecting to report earnings as follows: Six months to 31 December 2015, Six months to 31 December 2014 and % change *EPS and diluted EPS (cents). . . Full story

Strategic focus on world-class assets and sustainable positive free cash flow to strengthen balance sheet � creating the new Anglo American Asset portfolio * World class core portfolio of assets in diamonds,. . . Full story

Kumba shareholders are referred to the announcement today by Anglo American plc (�Anglo American�), at its annual results presentation, of its intention to exit its 69.7% shareholding in the Company, at. . . Full story

Reveneu for he interim period grew to R7.3 billion (R6.9 billion). Operatign profit increased to R289.3 million (R205.6 million). Profit for. . . Full story

Revenue rose to R39.6 million (R38.3 million). Operating profit increased to R5.1 million (R3.9 million). Profit for the period shot up. . . Full story

Revenue for the interim period ended 31 December 2015 increased by 3% to R8.2 billion (2014: R8 billion). Operating profit before. . . Full story

Net insurance premiums increased by 16% to R862.2 million (2014: R742.1 million). Net profit for the period attributable to equity holders. . . Full story

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