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South African Investors Taking Positive View Of Offshore Markets

by Phillip Morton, Investors

09 February 2004

Latest statistics released today by the Association of Collective Investments show that there was close to a R500m net inflow into foreign currency denominated unit trusts in the December quarter.

This marks a strong reversal of a negative trend which began two years ago amid poor market performance and volatility. It follows two successive quarters of outflows, totalling nearly R3 billion.

ACI chief executive Colin Woodin explained that improvement in investor sentiment reflects the better performance of offshore equity markets in the second half of last year. “Most offshore analysts are predicting further growth in equities during this US election year and have recommended investors raise equity levels in portfolios to take advantage of the expected continued bull trend," he observed.

Meanwhile, Asset Allocation Funds saw net inflows of just under R900m, which according to the ACI, suggests investors are leaving it to portfolio managers to make key asset allocation decisions. While the bulk of these inflows were from institutional investors (R777m) - some R100m was also invested by retail investors. Last quarter saw outflows of R105m from this sector.

However, there were still outflows of R209m from the Equity Funds sector (which accounts for half of all foreign collective investment schemes assets), although these were well down on the previous quarter's R720m.

“Smart investors appeared to be at last taking advantage of the relatively strong rand and using this opportunity to diversify their portfolios both geographically and in terms of asset class," suggests Woodin.

The fixed interest category had outflows of R171m mirroring the comparatively subdued performance of global bond funds. Woodin predicted that prospects of higher oil prices and inflation are likely to see a continuation of this trend relative to equities for some time.

Institutional funds (some 70 percent of industry assets) accounted for the major inflows this quarter, the ACI revealed. This was attributed to experienced investors' keenness to identify opportunities in offshore markets, said the Association.

Total Offshore Fund assets rose by R1 billion during the quarter to R45,5 billion with the number of funds increasing to 328 (320). This brings total assets of all collective investments registered in South Africa to over R275 billion. The foreign currency denominated funds represent 16,5 percent.

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