SA Unit Trusts – The Best Is Still To Come

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Globally, unit trusts (mutual funds) have become an important part of the financial system over the past 20 years. This is also true of South Africa however, despite considerably more rapid growth of the local industry over this period than in the US – the world’s biggest unit trust market – penetration of the investor universe still has a long way to go in SA.

Findings in a recent survey by the Investment Company Institute of the US mutual fund sector, illustrate these trends:

  • During the 20 years from 1989 to 2010, total assets of the US mutual fund industry increased from $899 billion to $10.5 trillion, or growth of 13.1 per cent per annum compound. Over the same period, the SA unit trust sector’s assets rose from R1.4 billion to R939 billion, an impressive compound annual growth rate of 38.5 per cent
  • In the US, the number of households owning mutual funds more than doubled over the 20 years to almost 52 million. Nearly 44 per cent of households now own mutual funds which represent 20 per cent of total household financial assets – there are 90.2 million mutual fund investors
  • There are no direct comparisons for these statistics in SA, however the number of accounts in the sector at the end of 2010 was 1.9 million (567 000 two decades earlier) indicating a lower degree of penetration, but also suggesting the significant growth potential into the future

The ICI survey paints a fascinating picture of the “typical” US mutual fund investor who has the following profile:

  • The typical investor is middle aged, employed and married and believes that mutual funds can help reach financial and retirement goals. Financial means are relatively modest – annual family income of $80 000 and family financial assets of $200 000. Only 15 per cent have incomes exceeding $150 000. Investments are typically held in 4 funds, of which at least 1 is an equity fund.
  • 68 per cent of typical investors own mutual funds via employee-sponsored retirement plans and 72 per cent own funds acquired outside their employment – 58 per cent are bought from intermediaries and 36 per cent from direct marketing channels
  • 58 per cent of mutual fund investors are between 40 and 64 years old – 24 per cent are younger than 40 and 18 per cent are older than 65
  • In terms of risk profile, 31 percent of mutual fund investors will take above-average risk to achieve above average returns, 49 per cent will take average risk to achieve average returns, and 20 per cent are risk averse.
  • the world’s biggest unit trust market – penetration of the investor universe still has a long way to go in SA.

Findings in a recent survey by the Investment Company Institute of the US mutual fund sector, illustrate these trends:

  • During the 20 years from 1989 to 2010, total assets of the US mutual fund industry increased from $899 billion to $10.5 trillion, or growth of 13.1 per cent per annum compound. Over the same period, the SA unit trust sector’s assets rose from R1.4 billion to R939 billion, an impressive compound annual growth rate of 38.5 per cent
  • In the US, the number of households owning mutual funds more than doubled over the 20 years to almost 52 million. Nearly 44 per cent of households now own mutual funds which represent 20 per cent of total household financial assets – there are 90.2 million mutual fund investors
  • There are no direct comparisons for these statistics in SA, however the number of accounts in the sector at the end of 2010 was 1.9 million (567 000 two decades earlier) indicating a lower degree of penetration, but also suggesting the significant growth potential into the future

The ICI survey paints a fascinating picture of the “typical” US mutual fund investor who has the following profile:

  • The typical investor is middle aged, employed and married and believes that mutual funds can help reach financial and retirement goals. Financial means are relatively modest – annual family income of $80 000 and family financial assets of $200 000. Only 15 per cent have incomes exceeding $150 000. Investments are typically held in 4 funds, of which at least 1 is an equity fund.
  • 68 per cent of typical investors own mutual funds via employee-sponsored retirement plans and 72 per cent own funds acquired outside their employment – 58 per cent are bought from intermediaries and 36 per cent from direct marketing channels
  • 58 per cent of mutual fund investors are between 40 and 64 years old – 24 per cent are younger than 40 and 18 per cent are older than 65
  • In terms of risk profile, 31 percent of mutual fund investors will take above-average risk to achieve above average returns, 49 per cent will take average risk to achieve average returns, and 20 per cent are risk averse.