South African local collective investment schemes (CIS) have attracted healthy net inflows of R26bn ($1.7bn) in the first quarter of this year, despite prevailing economic and political uncertainty dowsing investor confidence.

According to the CIS industry statistics, released by the Association for Savings and Investment South Africa (ASISA), SA CIS recorded R111bn ($7.27bn) net inflows for the 12 months’ period to the end of March 2016, the third highest in five years.

SA Multi Asset portfolios have attracted the bulk of these net inflows of R72bn ($4.71m) in the 12 months to March 31, 2016.

Meanwhile, SA Interest Bearing Money Market portfolios have attracted R35bn ($2.29m) of mainly institutional and corporate money, and SA Equity portfolios have received R3bn ($0.2bn).

SA Interest Bearing portfolios, however, continued to suffer net outflows – in the 12 months ended March 2016 these amounted to R20bn ($1.31bn).

Leon Campher, CEO of ASISA, said that over the past five years the industry has witnessed a fundamental shift in where CIS investors are placing their money.

“Five years ago, 50% of assets under management were held in SA Interest Bearing portfolios, with 25% in SA Multi Asset portfolios. We now have 51% of assets invested in Multi Asset portfolios and only 24% in SA Interest Bearing portfolios,” he said.

He explained that SA Multi Asset portfolios have risen in popularity with investors because of the benefits offered by the diversification across asset classes within one fund that is managed by an expert portfolio manager.

He added that pension and provident funds are also increasingly making use of SA Multi Asset portfolios.
According to Campher, the diversification benefits offered by Multi Asset portfolios are highlighted by recent sector specific performance figures.

While portfolios in the SA Equity General sector delivered an average performance (net of fees) of only 0.7% for the one-year to March 31, 2016, portfolios in the SA Multi Asset High Equity sector achieved 4.4%.

Demonstrating the benefits of diversification even more clearly was the SA Multi Asset Low Equity sector, which achieved returns of 5.8%.

“With these examples we are by no means propagating the pursuit of short-term returns, but simply showcasing how a well-diversified portfolio is able to weather extreme market volatility,” said Campher.

Looking at the longer investment terms, the average investment returns achieved by the SA Equity General sector and the SA Multi Asset High Equity sector are neck and neck, with SA Multi Asset Low Equity not far behind.

“For the majority of investors and their advisers it therefore makes sense to invest in a portfolio that offers similar returns as a general equity portfolio, but at a more diversified risk,” he said.

At the end of the first quarter this year, the local CIS industry managed assets of R1.92trn ($0.13trn) compared to R1.88trn ($0.12trn) at the end of December 2015.

At the end of March 2016, South African investors had a choice of 1,360 portfolios, an increase of 33 from the end of December 2015.

SA Multi Asset portfolios held 51% of assets, Interest Bearing portfolios 24%, Equity portfolios 21%, and Real Estate 4%.