Unit trust funds that are denominated in rands and whose management companies are based in South Africa are subject to the classification system introduced some years ago by the investment industry body, the Association for Savings and Investment South Africa. There are three tiers of classification.
1. The first tier is where the fund invests. A fund can be primarily South Africa focused, or it can be global (it invests outside South Africa), worldwide (it can invest anywhere in the world including South Africa), or regional (it invests in a specific region, such as the United States or the Far East).
2. The second tier is the broad asset class (or classes) in which a fund invests. This can be in equities (listed shares), interest-bearing instruments (bonds and money market instruments), or listed property. You also get multi-asset funds, which are not confined to a particular asset class – their portfolios are diversified across asset classes.
3. The third tier further delineates the types of assets the fund invests in. You can have a general fund, with a broad mandate, or a fund that is more targeted, such as a large-cap equity fund or a short-term interest-bearing fund, which would invest in shorter-term bonds and money market instruments. In the multi-asset category you have high-equity, medium-equity, and low-equity funds, depending on the level of equity they can hold in their portfolios. You also have flexible funds, which are unrestricted, and income funds, which specialise in providing a steady income at low capital risk – for pensioners, for example.
Here are a few examples:
- Coronation Equity Fund: South Africa - Equity - General
- Absa Bond Fund: South Africa - Interest Bearing - Variable Term
- Foord Balanced Fund: South Africa - Multi Asset - High Equity
- Nedgroup Investments Bravata Fund: Worldwide - Multi Asset - Flexible
Also marketed in South Africa are funds of offshore companies, which are denominated in foreign currencies such as the US dollar. These do not follow the South African classification system (although you do get similar types of funds) and are subject to approval by the Financial Sector Conduct Authority to be marketed here. They are for investors who literally want to take their money offshore, as against those who want to invest in offshore companies but want their investment to remain in South Africa, with returns paid in rands.
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