Page 145 - Profile's Unit Trusts & Collective Investments - March 2025

Classification of CISs

Balanced Funds
What are known officially as Multi Asset funds (previously Asset Allocation funds) are often
called balanced funds, ie, funds which “balance” the risk/return profiles of the various asset
classes to achieve a relatively low-risk, well-diversified portfolio.

As with all theme funds, investors are warned that Industrial sector funds may be more volatile
than funds that are diversified across a wider range of FTSE/JSE economic groups. In practice,
however, Industrial funds in SA are usually less volatile than Resource funds and often less volatile
than General Equity funds. In the latter case, this is because most General Equity funds in SA have
considerable exposure to Resources shares, which still comprise a large portion of the JSE’s large
cap stocks. Mining and resource shares, due to the sharp fluctuations that can occur in commodity
prices, are generally regarded as the most volatile (riskiest) stocks.
Unclassified Funds
Unclassified funds (previously called Varied Specialist) are those for which suitable sectors are
not available elsewhere – ie, the Unclassified categories are created to house those funds that don’t
fit anywhere else. Funds in these categories are usually themed (ie, not general equity), but have
fairly unique mandates that don’t allow them to be included in other sectors. These funds should
not be compared to one another within the sector because they define their own benchmarks. The
diversity in the sector means one would not necessarily be comparing “apples with apples”. (This
is why the unclassified sectors are not ranked in published performance tables.)
Themed funds that don’t have their own category won't always be assigned to the Unclassified
sectors. Where a themed fund meets the criteria for a “regular” sector and its asset mix is
comparable to other funds in the sector, ASISA will include the fund in the “regular” sector. The
Shari’ah compliant funds, high dividend yield funds, and “quants” funds, for example, are included
in the Equity–General sector.
Themes come and go depending on changes in technology, asset performance and areas of special
interest. As noted earlier, Gold funds once had their own sector, as did Empowerment funds and
Technology funds. Other themes historically have included new listings, growth shares, value shares
and consumer stocks. The creation of funds to exploit new, fast growing areas of business is inevitable,
and the future may see the advent of bio-energy funds, agriculture funds or healthcare funds. Unusual
theme funds in the US have included the Vice Fund, which focussed on gambling, alcohol and tobacco,
and the Golf Fund, which invested in companies associated with the sport. Narrowly themed funds,
however, are not always that helpful to investors – they often exploit a passing fad or fashion and do
not always offer the dependable long-term performance that investors seek.

Multi Asset Funds
Multi Asset funds (previously known as Asset Allocation funds) are funds which invest in a
broad range of assets, including shares, bonds, money market instruments and property equities.
The name of the category reflects the fact that portfolio managers of these funds have more
freedom than other asset managers regarding what assets to invest in. A manager of a general
equity fund, for example, must have 80% of its portfolio in shares at all times, whereas a manager
of a multi asset fund could have 70% in shares this year, and only 30% in shares next year (subject
to the constraints of the mandate).
At one time, the then Asset Allocation sector consisted of just two sub-sectors: Flexible funds
and Prudential funds (ie, Regulation 28 compliant funds). For South African funds, a decision was
taken in 2003, however, to break the Prudential sector into a number of narrower sectors in order to
group together the significantly different equity exposures across the category: Prudential Low Equity,
Prudential High Equity and Prudential Medium Equity. A Prudential Variable Equity sector was added
in 2008.
The 2013 ASISA revision of the classification standard adopted the principle that Regulation 28
compliant funds should be “flagged” as such rather than placed in separate categories. The former

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