This is a general discussion of asset allocation data. For specific information on what is contained in the asset allocation tables in FundsData Online, please see the relevant Help page.
Part of the information below is modified from Profile's Unit Trusts
& Collective Investments, used with permission.
Asset Classes
Investments can be divided into five main groups: cash, bonds, equities, property and exotics. The different characteristics of these asset classes gives them different risk/return profiles -- which makes them suitable for different investment objectives, but by no means interchangeable.
In broad terms, the main assets classes have the following characteristics:
Equities (shares in companies) are generally considered fairly risky. Statistically, it can be shown that the risk in equities diminishes over time, which is the main reason that equities are usually recommended as long-term investments.
Bonds (long-term debt instruments) are also comparatively risky (at least compared to other interest-bearing securities), but are considered less risky than equities. As a rule, bonds would be considered suitable for a shorter-term investment than equities.
Property is considered a comparatively low risk investment. Due to the comparatively low yields and high transactive costs, property is usually recommended as a long-term investment.
Cash (which includes money market instruments and fixed deposits) is considered a very low risk asset class and is usually recommended for short term investment.
In our asset allocation tables, a fund's portfolio holdings are grouped into the above four categories – equities, bonds, property and cash. Note that for SA unit trusts 'property' means holdings in listed property shares, not physical holdings of property assets. Also, 'bonds' may include other instruments that behave like bonds (such as interest-bearing preference shares), and 'cash' includes short-term interest-bearing deposits.
Sectoral Allocation
Within these assets classes there are sectors which also have different risk characteristics. Within equities, for example, shares in mining and resources companies are generally riskier than shares in utilities, retail stocks and pharmaceuticals, which are considered lower risk. In property, although this sometimes depends on market conditions, commercial and industrial property is generally less risky than residential property.
Effect of Asset Allocation
Depending on the mandate of a fund, it may be concentrated in one asset class (eg, a general equity fund) or be spread over all the asset classes (eg, a flexible fund or balanced fund). The risk/return characteristics of the different asset classes means that the composition of a fund has a significant influence on its potential returns and the associated level of risk. Even with a general equity fund, for example, the level of cash held in the fund influences the return. Although the ACI rules stipulate that a general equity fund must be 75% in shares at all times, the difference between being fully invested and having 25% in cash is significant in terms of performance.
In order to make the best use of asset allocation data, it is necessary to have a good understanding of the characteristics of the different asset classes. Profile's Unit Trusts & Collective Investments has a chapter on asset allocation which provides a comprehensive overview of the asset classes.
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This is a general discussion of asset allocation data. For specific information on what is contained in the asset allocation tables in FundsData Online, please see the relevant Help page.
Part of the information below is modified from Profile's Unit Trusts
& Collective Investments, used with permission.
Asset Classes
Investments can be divided into five main groups: cash, bonds, equities, property and exotics. The different characteristics of these asset classes gives them different risk/return profiles -- which makes them suitable for different investment objectives, but by no means interchangeable.
In broad terms, the main assets classes have the following characteristics:
Equities (shares in companies) are generally considered fairly risky. Statistically, it can be shown that the risk in equities diminishes over time, which is the main reason that equities are usually recommended as long-term investments.
Bonds (long-term debt instruments) are also comparatively risky (at least compared to other interest-bearing securities), but are considered less risky than equities. As a rule, bonds would be considered suitable for a shorter-term investment than equities.
Property is considered a comparatively low risk investment. Due to the comparatively low yields and high transactive costs, property is usually recommended as a long-term investment.
Cash (which includes money market instruments and fixed deposits) is considered a very low risk asset class and is usually recommended for short term investment.
In our asset allocation tables, a fund's portfolio holdings are grouped into the above four categories – equities, bonds, property and cash. Note that for SA unit trusts 'property' means holdings in listed property shares, not physical holdings of property assets. Also, 'bonds' may include other instruments that behave like bonds (such as interest-bearing preference shares), and 'cash' includes short-term interest-bearing deposits.
Sectoral Allocation
Within these assets classes there are sectors which also have different risk characteristics. Within equities, for example, shares in mining and resources companies are generally riskier than shares in utilities, retail stocks and pharmaceuticals, which are considered lower risk. In property, although this sometimes depends on market conditions, commercial and industrial property is generally less risky than residential property.
Effect of Asset Allocation
Depending on the mandate of a fund, it may be concentrated in one asset class (eg, a general equity fund) or be spread over all the asset classes (eg, a flexible fund or balanced fund). The risk/return characteristics of the different asset classes means that the composition of a fund has a significant influence on its potential returns and the associated level of risk. Even with a general equity fund, for example, the level of cash held in the fund influences the return. Although the ACI rules stipulate that a general equity fund must be 75% in shares at all times, the difference between being fully invested and having 25% in cash is significant in terms of performance.
In order to make the best use of asset allocation data, it is necessary to have a good understanding of the characteristics of the different asset classes. Profile's Unit Trusts & Collective Investments has a chapter on asset allocation which provides a comprehensive overview of the asset classes.
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