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Impact Investing

IPE special report May 2018

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South Africa: Rapid growth to continue

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The South African mutual fund industry has taken off over the past five years and more growth is expected in the near future.

The industry can trace its origins back to 1965 but, with the authorities taking a highly restrictive view as to what funds they would authorise, very little happened for the first two decades. This changed in 1987 and over the last five years the number of funds has almost tripled (to 110) with assets under management more than quadrupling to around R45bn ($10bn).

The domestic industry is dominated by offshoots of the major insurance companies - between them, Old Mutual, Guardbank, Sanlam, Investec and Syfrets control around 60% of total assets - but the banks may well start taking more of a stake with the 1 April change allowing money market funds.

General equity funds represent the largest category (25 funds and around 60% of assets). These are balanced funds which invest mainly in industrial and mining shares.

While there is no official breakdown between institutional and retail investment, it is perhaps significant that the fastest-growing category is the managed prudential sector, now with 13 funds invested according to pension fund guidelines. In less than three years the sector has captured some R4bn ($900m) drawn mainly from small institutional pension funds.

Offshore and emerging market funds have tended to pay more attention to South Africa since the political situation has improved and it was given a weighting in the IFC World Index, although there are still only a handful of country-specific funds. Offshore vehicles are managed by South African groups like the Old Mutual funds, out of Dublin, Bermuda and London, and Syfrets, out of the Isle of Man. David Hunt

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