Page 157 - Profiles's Unit Trusts & Collective Investments - September 2024

Classification of CISs

Multi-Manager Funds
The multi-manager fund is another fund “concept” which transcends the ASISA sectors.
Multi-management is about the way in which a fund is managed rather than the type of assets in
which it invests (the latter being the basis of the ASISA classification).
In the early days of unit trusts each fund had its own fund manager. This “single fund manager”
concept is still the most common management structure today.
Obviously the single fund manager does not work in isolation, but has a support team at the
management company, which may include fundamental, technical and quantitative analysts. Some
management companies use a team approach to manage their funds. In this case no single fund
manager is entirely responsible for one fund. Instead, decisions about asset allocation are made by an
investment committee. Either way, both individual fund managers and investment committees tend
to have a particular investment “style”.
The multi-manager concept grows out of the belief that the investment styles of particular
managers or investment committees are not equally effective under all market conditions. The
particular style of one investment house may produce relatively good performances in a bear market,
while the style of another may produce above average returns in a bull market. Or one style may excel
when bond markets are running, and another when offshore markets are doing well.
The multi-manager fund tries to capitalise on these different strengths by outsourcing the
management of the fund to two or more complementary managers or investment houses.
Multi-managed funds typically have a greater level of diversification compared to single
manager funds and therefore lower active risk (ie, non-market risk) than single manager funds.
There are two main types of multi-manager funds: funds of funds and “manager of managers”
type funds. Note that not all funds of funds are explicitly multi-manager funds in the true sense: to
qualify as a multi-managed fund the manager must be choosing underlying funds specifically on
fund manager and style criteria rather than asset allocation criteria.

Exchange Traded Funds (ETFs)
Exchanged Traded Funds (ETFs) are funds Exchange Traded Funds
which are listed on a stock exchange and can be An Exchange Traded Fund (or ETF)isa
traded like a share. fund which tracks an index but which can
Initially ETFs were tracker or index funds be traded on a securities exchange like a
offered at low cost. share. This allows investors to buy ETFs through a
stockbroker, although some ETFs can also issue
Recently, however, actively managed ETFs units or shares directly. Relatively niche products 20
have been launched that are managed by fund years ago, ETFs are now a major – and booming –
managers with the expertise to pick securities. investment category. Recently passive funds in the
The majority (but not all) ETFs listed on the USA have dominated investor interest, soaking up
JSE are also registered as collective investment the lion’s share of inflows.
schemes, in effect creating two markets for these
funds.
South Africa’s first ETF, the Satrix 40, was launched in November 2000. It tracks the FTSE/JSE
Top 40 index. Since the launch of the Satrix 40 the JSE’s ETF sector has grown to 91 funds by
March 2024, including sector-specific ETFs, funds that track overseas and global indices, and even
a fund that tracks the rand.
From a fund management point of view, most ETFs are very similar to other index funds: they
replicate the weighted constituents of an index in a physical portfolio, benefiting from market
movements, and collecting and paying dividends.
The new actively managed ETFs are similar to actively managed unit trust funds, but the
managers have to be prepared to declare their holdings on a daily basis.
From the investor’s point of view, ETFs have several features which differentiate them from
unit trusts.
ETFs can be bought and sold through a stockbroker as they trade all day like any other share
so investors can take advantage of intra-day market movements and the ETF prices are

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