Page 146 - Profile's Unit Trusts & Collective Investments - March 2025

CHAPTER 8

Chart 8.1 Revised Regulation 28 prudential categories were in a sense
misleading as certain funds in other
Asset Overall Sub- CISCA
Category Limit Limits Limit categories (such as money market
Equities 75% funds and bond funds) are
Market cap greater than R20bn 15% 10% 1 automatically Regulation 28
Market cap between R2bn and R20bn 10% 10% 1 compliant. Under the new
Market cap less than R2bn 5% 5% 1 classification system, compliance
Unlisted equities (subject to strict valuation requirements) 15% 10% 2 with Regulation 28 of the Pensions
Foreign exposure including inward listed shares 45% 45% Funds Act will not be a factor in
Investment in a suitably regulated vehicle in Africa 5% 5% categorisation – instead, Regulation
Cash 100% 28 compliant funds will be identified
Any single money market instrument issued by a South 25% note 3 by an additional “flag” or label. In
African bank addition, a complete register of all
Debt 100% Regulation 28 compliant funds are
On-balance sheet bank-issued corporate and public debt 75% note 3 available on Profile’s FundsData
Property 25% website under the Funds menu item.
Market cap greater than R10bn 15% note 4 The South African Multi Asset
Market cap between R3bn and R10bn 10% note 4 category have since 1 October 2024
Market cap less than R3bn 5% note 4 included the following sectors:
Commodities 5 10% Multi Asset – Flexible funds
Commodities other than gold 5% note 5
Multi Asset – High Equity funds
Gold 10% note 5
Multi Asset – SA High Equity
Other Assets 5 15%
funds
Hedge Funds of Funds and Private Equity Funds of Funds 5% note 5
(per fund) Multi Asset – Low Equity funds
Limit per individual fund (ie, not a FoF) 2.50% note 5 Multi Asset – Income Funds
Other assets not referred to in the amendment 2.50% note 5 Multi Asset – Unclassified
Housing Loans 5 65% The equity exposure bias in the
Loans granted to members directly by the fund 5% note 5 sector names – a feature preserved
1
Greater of percentage or 120% of free float index weighting but no more than from the old prudential categories – is
20% of fund (or 35% for specialist funds)
2 designed to reflect different levels of
Max 5% in any one unlisted entity
3 See FSB notice 90 of 2014 (which replaced notice 80 of 2012) risk. Equities are generally the most
4 Limits as per other equities for listed property shares
5 volatile asset class and equity
Collective investment schemes cannot invest directly in these categories
exposure is therefore the
predominant source of risk in a multi
asset portfolio. Although not an absolute indicator of the risk associated with any one category, it
does group the funds more meaningfully than if they were in one sector.
Prior to 2013 a category existed under Asset Allocation for Targeted 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

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