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www.thevillagenews.co.za
16 October 2019
MY WEALTH
Navigating through the unit trust clutter By Werner Gerber, CFA Wealth Manager PSG Wealth Hermanus
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n last month’s edition, we provided you with a general overview of collective investment schemes, also known as unit trust funds. In this edition, we focus on mandate-specific funds to help you navigate through the unit trust clutter.
The Association for Savings & Investment SA (ASISA) classifies unit trust funds according to where they invest (locally or offshore), what they invest in (the asset class) and their main investment focus (how much they can invest in a particular asset class). Together, these three tiers form the basis of all mandates. Unit trust funds are firstly classified into four first-tier groups, based on their underlying offshore investments: South African portfolios; worldwide portfolios; global portfolios and regional portfolios.
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South African portfolios, which invest at least 60% of their assets in South African investment markets, such as the JSE. They may invest up to a maximum of 30% of their assets outside of South
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Africa, plus an additional 10% of their assets in Africa, excluding South Africa. Worldwide portfolios, which invest in both South African markets and foreign markets. No limits apply to either domestic or foreign assets. Global portfolios, which invest at least 80% of their assets outside South Africa, with no restriction on the assets invested in a specific country (for example the United States) or geographical region (for example Africa). Regional portfolios, which provide investors with at least 80% exposure to assets in a specific country or geographical region outside South Africa.
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The second tier classification relates to the kind of assets the fund holds and groups it into one of the four following categories: interest-bearing; real estate; equity and multi-asset.
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Interest-bearing investments represent loans made by investors (including the managers of unit trust funds) to borrowers (including governments and corporations). Governments (including municipalities and state-owned enterprises), as well as corporations, use the loans to fund
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infrastructure developments, such as roads and dams, hospitals and schools, while corporations use it to grow their business and to undertake money-making projects. Interest-bearing investments are categorised as either cash, money market instruments or bonds, depending on the lifespan of the loan. If the lifespan is shorter than three months it is classified as cash; between three and 12 months as money markets and longer than 12 months as bonds. Cash has the lowest risk and usually provides the lowest return over time, while bonds have slightly more risk and usually provide slightly better returns. Real estate represents investments in real estate investment trusts or REITs, which in turn use the funds to invest in portfolios of residential, commercial, industrial and retail properties. The investors earn a share of the income produced by the properties – without actually having to go out and buy, manage or finance the property. Investments into REITs carry more risk than bonds, leading to correspondingly higher returns over time. Equity investments are the highest-risk, highest-return asset class over time. It refers to the buying and holding of shares in a corpora-
Artscape brings its bells ‘n whistles to Hawston Every year Artscape identifies a historically disadvantaged community for its annual Outreach Programme, and this year it’s Hawston’s turn. The Artscape showcase will take place at Hawston Primary on 18 October. A wide variety of artists will participate in different genres, from Classical Western to African indigenous, as well as well-known personalities. Inclusive to the programme is a career exhibition for learners to create awareness of career opportunities within the entertainment industry. Artscape’s technical team also participates, explaining the mechanics of the staging, sound and lighting equipment typically used in a theatre. The yearly rural outreach programme cannot happen without essential partnerships like the City of Cape Town, Provincial Government and of course the local municipality. In addition, a local organisation is always a partner as well. This year it is Hawston’s Overstrand Association for Persons with Disabilities. Artscape CEO, Marlene le Roux can barely contain her excitement about this project, saying: “I know I shouldn’t have favourites or pet projects, but this one is really close to my heart and completely in line with where Artscape is heading with its vision to empower youth from outlying communities. To see their faces light up and to hear the uproarious applause is absolute magic. Very little comes close to that joy and that reward. “But, more importantly, it is vital to remember that the name ‘Artscape’ not only refers to a building: it is about how we enhance social
cohesion and dialogue with communities, and how we best utilise the arts as a vehicle for inclusivity of all communities, irrespective of language, religion, race or gender.” The artists that will take part in this year’s programme are: • Zinzi Nogavu – African Traditional music and singer • Zanne Stapelberg – Opera Singer • Dizu Plaatjies – Indigenous music • Craig Lucas – Singer (SA Voice winner) • Dance for All • Jazzart Dance Theatre • Cape Town Opera • Unmute Dance Company – Contemporary dance • Zip Zap Circus • Cape Philharmonic Orchestra – Classical music Schedule of performances at Hawston Primary on 18 October: 10:00 – 11:00: Free performance for primary school learners 12:00 – 13:00: Free performance for high school learners 19:30: Gala Performance. Tickets are R100 pp, available from Hermanus Tourism (Tel: 028 312 2629 or Tourism Manager Frieda Lloyd on 028 313 5022.
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tion on a stock market and signify proportionate ownership of the corporation’s assets and earnings. A multi-asset investment contains a combination of the above-mentioned asset types.
There are many aspects that should be taken into account when choosing a unit trust. Understanding the ASISA categories is just a method to narrow
down your options and to make evaluations more relevant. NOTE: The information in this article does not constitute financial, tax, legal or investment advice and the companies in the PSG Konsult Group do not guarantee its appropriateness or potential value. As individual needs and risk profiles differ, we recommend that you consult your qualified financial adviser if needs be.
The third and final tier of classification relates to the main investment focus of the unit trust and is a subcategory of the second tier. Interest-bearing investments
Variable term Short term Money market
Real estate
General
Equity
General Large cap Mid & small cap Resources Industrial Financial Unclassified
Multi-asset
Income Low equity Medium equity High equity Flexible Target date portfolios
