30 January 2013

Candice Paine

According to ASISA's unit trust statistics for the last quarter of 2012, many South Africans missed out on a strong run in local equities.

Candice Paine, head of retail at Sanlam Investment Management (SIM) says that investors opted instead for the perceived safer bet of asset allocation funds (R17.7-billion flowed into domestic asset allocation type funds over the period).

"Ongoing bad macroeconomic news is likely to have influenced the decision to stay in balanced funds, which in fact delivered lower returns (21.38%) relative to equity funds (26.68%). Equities have been buoyed by central banks back stopping financial markets, Chinese growth looking like it may have bottomed and some good indicators out of Europe.  We believe it would now be prudent for investors and advisors to look at valuations when making their investment decisions."

But the quarter generally was another pleasing one for unit trust flows, with R40.3-billion flowing into the industry in total and domestic retail funds seeing a net-inflow of R37.1-billion.  "We did see R9-billion flowing out of money market funds which may be attributable to investors using funds to pay off debt or moving funds to longer terms funds in or to find yield." Says Paine.

"Many investors did go in search of yield, with R13.2-billion flowing into fixed interest varied specialist funds, R3-billion into the bond category and R6-billion into real estate funds. Both categories delivered, with South African bonds returning an average of 15.99% and property funds 35.88%. The performance of sector specific equity funds tracked market performance with the domestic financial category returning 35.15% over the period. Industrials also performed strongly."

Paine says passive funds once again outperformed active asset managers with only 18.4% of active equity funds outperforming the JSE African All Share and 6.8% the JSE Equally Weighted Top40. "Active managers have remained on the backfoot because of value style investing underperforming relative to momentum investing. Smart beta indexation funds - essentially passive funds which rely on index construction which differs from straight market cap indices - once again proved their worth."

Looking ahead Paine said an education drive to consumers and advisors would be key in the short term to ensure ASISA's new classification model is properly understood and utilised. She said the new model was a positive for many funds because it would ensure they were measured against the correct competitor funds.

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