Page 71 - Profiles's Unit Trusts & Collective Investments - September 2024

Costs and Pricing

Details of all charges levied by the manager, including any charge levied on the repurchase
of participatory interests and any change in such charges or how they are calculated
The composition of the assets of the portfolio classified by appropriate category or industry
sector
A statement that copies of the audited annual financial statements of the manager and of
the scheme managed by it are available, free of charge, on request by an investor
For marketing reasons, many CISs report to investors quarterly or half-yearly.
While on the subject of fund reporting, note that certain mandatory disclosures are also
required on any marketing material prepared by a CIS manager. These form part of the investor
protection policies underlying CISCA, in terms of which the CIS manager must fully inform any
prospective investor about the nature of the investment and the associated risks.
Section 100 (4) of CISCA states that “there must be included in every price list, advertisement,
brochure or similar document published by a manager or by any of its authorised agents in which
participatory interests are commended to the public, a statement in clear and unambiguous terms, to
the effect that the value of participatory interests in a portfolio is subject to fluctuation from time to
time relative to the market value of the assets comprised in the portfolio…”

Media Reports
In addition to the (at least) annual report from the portfolio manager, investors and advisors will
also find considerable information available in the media. Various internet services and LISPs make
available fact sheets (similar to the ones in this handbook), and prices and performance statistics are
available in many daily and weekly newspapers and financial magazines.
Tables of performance figures in the press usually follow the classification system used by the
industry (see Chapter 8).
The grouping of funds for comparative purposes is important because of the difficulties of
comparing the performance of different asset classes. Fixed-interest funds, for example, are subject
to very different factors than equity funds. Fixed-interest funds are therefore grouped together in
their own sectors, as are the various equity fund categories.
Another benefit of tables organised in categories is the ability to view a group of comparable
funds in relation to an industry benchmark, such as the JSE All Share index for general equity funds.

Performance Statistics
Most investors consider good investment performance (a good rate of return) the sine qua non of
investing in a CIS. This seems too obvious to mention, but in fact the definition of “good
performance” is not entirely clear.
If “good performance” means, say, top quartile performance, then over what period? Or does it
mean consistent performance over any range of time periods? Or does it mean tax efficient
performance (which is affected by the mix of capital gain vs income in the total return)? Or does it
just mean a superior performance to an appropriate benchmark? And then there’s the question of
risk – surely good performance must be achieved at an acceptable level of risk? What about inflation
– surely performance figures are meaningless unless they take inflation into account?
Measuring and comparing “investment performance” is not as simple as it seems. In addition to the
question of which standard you measure against, there are also a number of more technical issues which
impact on investment performance and how it is presented. These include:
Performance figures may be presented as absolute returns, average annual returns
(compounded or not), or even rolling annual returns
The costs associated with unit trust investment may be either included or excluded
(although the industry standard is NAV-to-NAV figures)
Lump sum and monthly investments require different treatment to enable fair “like with like”
comparisons
Different methods for calculating the reinvestment of dividends and interest may be used

Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts 69