The South African unit trust industry had R3.1tn in assets under management (AUM) at the end of 2021, a 15% increase compared to 2020, according to statistics from the Association for Savings and Investment South Africa (Asisa). It is also the first time that total local unit trust AUM has exceeded R3tn.

Net flows in the December quarter of R33bn brought total net inflows for 2021 to R56bn.

Sunette Mulder (pictured above), a senior Asisa policy adviser, described the flows as muted and well down on the record net inflows of R213bn in 2020. In addition, the flows in 2021 were skewed by the closure of the R80bn Absa Money Market fund, as investors transferred these assets to banking products. As a result, about R74.5bn moved out of the money market category in 2021.

During the year, the most popular category was the South African interest-bearing variable-term category, which incorporates bond funds and attracted net inflows of R29.7bn during the year.

Critics often accuse unit trust investors of chasing short-term performance. But there was hardly a rush last year into South African general equity funds – the best performing category with a 28% average return last year. This category attracted just R9bn in net flows.

But Mulder said that South African equity funds generated a 7.9% per annual return over the past five years, well below global equity funds, which gained an annualised 15.2%. Equity fund gains were also below variable-term interest-bearing funds, which returned an annualised 8.1%, and multi-asset high equity funds, which yielded an annualised 8.0%.

‘We have too many funds’
Twenty-six funds, net of closures, were launched in 2021, which brought the total registered South African funds to 1,710. On top of this, there are 592 foreign-currency funds registered for sale in South Africa. South Africans have R698bn of assets under management in these funds on a see-through basis.

‘We have too many funds for our ecosystem,’ said Asisa co-CEO Leon Campher.

Many South African unit trusts aren’t run by fund managers but by financial advisers and brokers on a white-labelled basis.

But there is a long tail of subscale funds, and a large proportion of assets are held in the 10 largest funds headed by the R156bn

About 47% of South Africa’s assets are held in balanced or multi-asset funds, compared with 12% globally. On the other hand, pure equity funds dominate the global industry and make up 47% of the assets. In South Africa, investors hold 25% of their assets in global equity funds.

Campher said that bond funds make up 5% of assets in South Africa, but globally bond funds hold 20% of global assets. These funds are particularly popular in Germany and France, he said. Meanwhile, money market funds have a 12% market share locally and globally.