Although most South Africans are counting their rands and cents, retail and corporate investors as well as retirement funds continued to invest in the collective investment schemes (CIS) industry, which recorded net inflows (new money invested and dividends reinvested) of R108-billion in 2022, ending the year with R3.14-trillion in assets under management.

Collective investment schemes include unit trusts and hedge funds.

“Returning assets under management to above the R3-trillion mark was quite an achievement given the strong headwinds that our industry faced in the past year,” says Sunette Mulder, a senior policy adviser at the Association for Savings and Investment South Africa (Asisa).

Commenting on South Africa’s recent greylisting, Mulder says apart from the reputational impact of being labelled as a high-risk jurisdiction, the greylisting may result in more onerous and costly compliance requirements for life assurance companies when dealing with cross-border transactions.

“At this point, we continue to watch developments, obviously well aware that there are considerations of reputational risks to the industry,” she says.

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Adriaan Pask, chief investment officer at PSG Wealth, says he does not believe markets will react “over-negatively” to the greylisting, particularly since it was widely expected and had already been priced in by markets.

“Improving and strengthening current anti-fraud and money laundering legislation should be considered a plus for investors, as it provides foreign investors more protection and safeguards when they invest money in South Africa. Once all requirements are met, it also puts our country on par with international legislation found in other developed nations,” he adds.

Annabel Bishop, an economist at Investec, says most of the identified deficiencies were addressed over the last year. 

“Some of this work included the issuance of sector-specific guidance, conducting a second round of sectoral risk assessments, instituting a new risk rating tool, enhancing the frequency of inspections, holding regular outreach and awareness sessions with banks and life insurers,” she says.

While greylisting may not pose an immediate threat, the tumultuous economic climate of 2022, with increasing interest rates together with pockets of opportunity in the equity market, was instrumental in moving money out of certain sectors. The SA interest-bearing short-term sector saw the highest net outflows, losing R8-billion. However, Mulder says this is hardly surprising, given last year’s extreme market volatility.

She adds that the movement in the industry’s assets under management mirrored the journey of the JSE All Share Index, which ended 2022 almost exactly where it finished in December 2021. It closed at 73,709 on 30 December 2021 and 73,048 on 30 December 2022.

The local CIS industry first reached the R3-trillion milestone in the last quarter of 2021, finishing the year with R3.14-trillion in assets under management. A turbulent year for stock markets resulted in assets under management dropping to R2.98-trillion in the second quarter, but by the end of 2022, the local CIS industry had clawed back the losses.

Mulder notes that while 44% of all international CIS assets are invested in equity portfolios, only 19% of local CIS assets are held in South African equity portfolios. If you break it down further, just under half of these assets (49%) are in South African (SA) multi-asset portfolios, with the rest in SA interest-bearing portfolios (31%) and SA real estate portfolios (1%).

South African investors were spoilt for choice with 1,769 local CIS portfolios at the end of December 2022, an increase of 59 portfolios over the year. Most of the total net inflows (R59-billion) went into South African multi-asset portfolios, which are designed to provide diversification across asset classes within a single portfolio. The SA multi-asset category comprises 769 portfolios across six categories: income, flexible, high equity, medium equity, low equity and unclassified. DM/BM