Page 146 - Profiles's Unit Trusts & Collective Investments - September 2024

CHAPTER 8

Chart 8.1 Revised Regulation 28 classification system, compliance with
Regulation 28 of the Pensions Funds Act
Asset Overall Sub- CISCA
Category Limit Limits Limit will not be a factor in categorisation –
Equities 75% instead, Regulation 28 compliant funds
Market cap greater than R20bn 15% 10% 1 will be identified by an additional “flag”
Market cap between R2bn and R20bn 10% 10% 1 or label. In addition, a complete register
Market cap less than R2bn 5% 5% 1 of all Regulation 28 compliant funds are
Unlisted equities (subject to strict valuation requirements) 15% 10% 2 available on Profile’s FundsData website
Foreign exposure including inward listed shares 25% 25% under the Funds menu item.
Investment in a suitably regulated vehicle in Africa 5% 5% The South African Multi Asset
Cash 100% category will from 1 October 2024
Any single money market instrument issued by a South 25% note 3 include the following sectors:
African bank
Multi Asset – Flexible funds
Debt 100%
On-balance sheet bank-issued corporate and public debt 75% note 3 Multi Asset – High Equity funds
Multi Asset – SA High Equity funds
Property 25%
Market cap greater than R10bn 15% note 4 Multi Asset – Low Equity funds
Market cap between R3bn and R10bn 10% note 4 Multi Asset – Income Funds
Market cap less than R3bn 5% note 4 Multi Asset – Unclassified
Commodities 5 10% The equity exposure bias in the
Commodities other than gold 5% note 5 sector names – a feature preserved from
Gold 10% note 5 the old prudential categories – is
Other Assets 5 15% designed to reflect different levels of
Hedge Funds of Funds and Private Equity Funds of Funds 5% note 5 risk. Equities are generally the most
(per fund)
volatile asset class and equity exposure
Limit per individual fund (ie, not a FoF) 2.50% note 5
is therefore the predominant source of
Other assets not referred to in the amendment 2.50% note 5
risk in a multi asset portfolio. Although
Housing Loans 5 95%
not an absolute indicator of the risk
Loans granted to members directly by the fund 5% note 5
associated with any one category, it does
1 Greater of percentage or 120% of free float index weighting but no more than
20% of fund (or 35% for specialist funds) group the funds more meaningfully than
2
Max 5% in any one unlisted entity if they were in one sector.
3 See FSB notice 90 of 2014 (which replaced notice 80 of 2012)
4 Prior to 2013 a category existed
Limits as per other equities for listed property shares
5 under Asset Allocation for Targeted
Collective investment schemes cannot invest directly in these categories
Absolute and Real Return funds. Added
in 2003, the sector catered for funds that
aimed to beat inflation or to achieve a defined minimum return. The typical benchmark of an
absolute or real return fund is CPI plus a real return target. As part of the 2013 classification
revision these funds were moved to other appropriate multi asset sectors based on their defined
mandates.
As mentioned earlier, some Income Funds, which previously fell under the Interest Bearing
(then Fixed Interest) category, were moved to Multi Asset under the 2013 revision. This is because
some income funds can, mandates permitting, invest a portion of assets in high dividend shares or
other instruments that cannot strictly be defined as interest-bearing securities.
Flexible Funds
Flexible funds invest in a combination of securities in the equity, bond, money and listed
property markets. They are often aggressively managed, and most flexible fund mandates allow the
fund manager to shift holdings from one asset class to another at any time. Managers of flexible
funds seek to maximise total returns by favouring different asset classes at different times based on
prevailing economic and market conditions (eg, moving predominantly into interest-bearing
securities during a stock bear market). The mandates of flexible funds can vary significantly, and
this – plus the large degree of discretion enjoyed by fund managers in this sector – means that a
wide range of risk/return characteristics are found across Flexible funds.
For many people, flexible funds are regarded as the greatest test of asset management ability.
Subject to mandate constraints, the manager of a flexible fund has complete freedom to determine

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