WHAT IS THE STRUCTURE OF THE RETAIL FUNDS MARKET? WHAT HAVE BEEN THE MAIN TRENDS OVER THE LAST YEAR?

Wednesday, January 25, 2012
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Open-ended retail funds
The open-ended retail funds market in South Africa consists of:

Collective investment schemes (CISs).
Property loan stock companies (PLSs).

The Financial Services Board Annual Report 2011 records the following market developments:

CISs in securities. The funds attracted net annual inflows of ZAR107 billion (as at 1 November 2011, US$1 was about ZAR7.8). The bulk of the inflows came in the fourth quarter of 2010, when the funds attracted a record-breaking ZAR36 billion.
Foreign CISs in securities. Net inflows for the period up to the end of March 2011 reached ZAR16 billion. The overall value of assets under management increased from ZAR107 billion in March 2010 to ZAR122 billion in March 2011.
CISs in property. The market capitalisation of funds increased to ZAR29 billion at 31 March 2011 compared to ZAR28 billion at March 2010. The number of participatory interests in the industry increased to ZAR4.6 billion from ZAR4.5 billion in 2010.
CISs in participation bonds. The aggregate amount owing to 21,680 participants as at 31 March 2011 was ZAR3.7 billion (compared to ZAR3.5 billion in March 2010). There are five schemes and 1,417 registered participation bonds.

For definitions of these types of funds, see (PDF attached below) Question 2, Openended retail funds.
PLSs obtain their income from a property portfolio. According to a newsletter dated 18 November 2011 published by the Property Loan Stock Association (the representative umbrella body of the property loan stock sector in South Africa), from October 2001 to 2011 the South African listed property sector's market capitalisation increased considerably from ZAR12.8 billion to ZAR144.1 billion.
Closed-ended retail funds
Closed-ended retail funds are CISs with a limited number of securities in issue. They are normally created as open-ended retail funds and then change into closed-ended retail funds. This normally happens when the fund has raised the required capital and the there are typically no more shares available from the fund for subscription (for example, in the case of a CIS in property). It is also important to note that there can be various other reasons why an open ended fund may become closed. In practice, both open-ended retail funds and closed-ended retail funds are subject to the same regulation.

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