WHERE ASSET MANAGERS ARE SEEKING RETURNS

Offshore investments and money markets have been flooded as SA’s economic malaise continues. Looking for higher returns leaves fund managers between Scylla and Charybdis – is the risk worth the uncertain returns, or should capital be parked at low yields for now? Brendan Peacock looks at how SA’s investment gurus are approaching the Covid-19 fallout.

- Brendan Peacock

Like any business during one of the world’s most extreme lockdowns, South African asset and investment managers have had to contend with unprecedented and unexpected disruptions to operations because of the Covid-19 pandemic. Some of these adaptations will be temporary, but some will likely reshape the industry for many years to come.

The Covid-19 pandemic is proving to be one of the worst crises to confront the investment community, but SA fund managers believe the crisis merely serves to reinforce the investor biases that were already in place before lockdown.

In response to the pandemic, what South Africans have elected to do with their investments is to accelerate a five-year trend. The latest quarterly report from the Association for Savings and Investment SA (Asia) shows that local investors have shunned high-equity or balanced funds to find more certainty and protection from volatility in the money market and fixed-income funds. To date, decent yields have proven them right.

“We’ve seen meaningful growth in the market share of money market funds, from 15% to 18% in the last five years. This reflects investors trying to get creative to compensate for underperforming equity markets over the last five years. Locally, we’ve been fortunate to have relatively high-interest rates and good yields, but this easy option is now disappearing as rates fall,” says Sangeeth Sewnath, deputy managing director of Ninety One.