Spooked SA investors avoided equities in 2019

SA investors shunned local equities in 2019, data from an asset management association shows, as companies from retail to manufacturing battle to increase profit growth against a gloomy domestic economic backdrop.

The Association for Savings & Investment SA (Asisa), which represents most of the country’s asset managers, said investors in the local collective investment scheme (CIS) industry opted for multi-asset portfolios, which held 49% of the industry’s assets in 2019, with equities holding only 18%.

The CIS industry recorded net inflows of R123.2bn in 2019, bringing the industry’s assets under management to R2.5-trillion.

Less than a third of the assets were held in local interest-bearing portfolios and 3% in real estate.

Returns from some of the biggest companies on the JSE, which underperformed some its global peers by only rising 8.24% in 2019, failed to impress investors in a stagnant economy that has sapped investment and consumption spending.

“Our market is very much equity driven, it always has been. So there will always be some level of appetite for equities. It just depends on the balance between the investors’ need to potentially have lower-risk investments and some protection on the downside,” Asisa senior policy adviser Sunette Mulder said.

Asisa said multi-asset income portfolios attracted the highest inflows in the year, amounting to R70.5bn, while investors also favoured short-term, variable and money market, interest-bearing portfolios that included bonds.

“Remaining in risk assets through good and bad times is important. When you look at the flow data, there were signs of investor capitulation in the current set-up in SA where we have seen outflows from high-equity funds and inflows into income funds and specifically money markets,” PSG Asset Management equity analyst Mikhail Motala said.

SA’s general equity sector experienced net outflows of R13.5bn in 2019 while there were net outflows of R3.6bn in portfolios in the multi-asset medium-equity category and of R14.8bn in low equity.  

“Investors will always look at returns with hindsight, and if you look at equities over the past five years, returns have been paltry,” Motala said.

“If equities have been losing to cash … you expect people to move from equities to cash. The yields across the asset class spectrum are high, so investors are looking at [the] money market or at least government bonds that are yielding close to 10%,” he said.

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