How SA professionals are investing their money

Recent market volatility and the uncertain investment climate have raised questions among SA investors. Industry trends show that investors are reducing equity exposure and increasing their exposure to fixed-interest investments.

Though equities have outperformed fixed interest over the past 25 years, in recent times investors have started to prefer the relative safety of cash and bonds.

Since 2016, muted economic growth locally, and an increase in geopolitical risks globally, contributed to SA equities underperforming fixed-interest assets.

The table below illustrates some of the most popular Association for Savings and Investment SA (Asisa) categories with regards to net flows and the contrast in their performance during two specific periods.

During period 1, there was a clear benefit to investors who increased their equity exposure. The opposite is true during period 2, where taking on additional risk resulted in additional underperformance.

Investor response

Sustained equity underperformance during the medium term has contributed to investors switching from equities to SA fixed interest. Though this derisking trend started in 2016, it gained considerable momentum during 2018, as the JSE all share index lost 8.53% during the calendar year.

When observing asset class net flows across the industry during these two periods, there has been a clear shift in the direction of flows. The graph illustrates the percentage flows into each asset class during period 1 (July 2012 to December 2015) and period 2 (January 2016 to June 2019):

Are professionals any different?

In contrast to industry trends, PPS investors have been more resilient regarding their investment behaviour. Though there has been a slight increase in the proportion of assets flowing into fixed-interest investments, the shift has been significantly lower compared with the industry. The consistency of net flows over time onto the platform is illustrated below:

Asset class flows on the PPS Investments platform

A look into the professions saving the most on our platform shows that they continue to maintain a healthy allocation to growth assets, with those in the financial and accounting profession having the largest allocation to equities, and those in the dental profession the lowest.

Professionals investing towards retirement goals

Investing towards retirement remains the priority for the majority of members across the age spectrum. Furthermore, the research showed that other popular investment solutions include investment accounts and tax-free investments, particularly in the 20 to 44 age group in the professional market. Looking at professionals that save the most, dentists top the category, ahead of scientists and accountants by almost 40%.

Stay focused and committed to your financial plan

The best defence against risk and uncertainty is to hold a well-diversified and sensibly constructed portfolio that is not reliant on any particular market outcome. Through our multi-manager approach, we combine various asset managers that have been through our rigorous research process and due diligence to offer a carefully selected combination that is well placed to achieve the stated objectives.

Making rash investment decisions could affect your ability to achieve your long-term goals. Keep in mind that despite their volatility over the short term, equities are an important asset class for achieving long-term inflation-beating returns. It is therefore essential to maintain an appropriate and meaningful allocation that is consistent with one’s risk appetite and investment objective.

It’s better to consult with your financial adviser, who can provide guidance and help you make informed financial decisions within the context of your holistic financial plan.

Visit www.pps.co.za/invest for more information.

This article was paid for by PPS Investments.