Page 75 - Profile's Unit Trusts & Collective Investments - March 2025

The CIS Industry

Chapter 4

The CIS Industry

NQF
The CIS Industry
Relevant to
The main players in the CIS industry are the management companies (or 243135: 3
more correctly CIS managers), the trustees, the asset managers, the agents 243147:1-4
243155: 1, 2
and brokers, and the regulatory authorities. This chapter looks at the
structure of the industry and the roles of each of the main players.
Management Companies

The management company, or “manager” as it is more correctly referred to under CISCA, is
the central coordinating element of a collective investment scheme (CIS). It is usually the company
that launches a CIS, and which maintains overall responsibility for administration, appointing
asset managers, appointing trustees, and the marketing of the fund to investors. While some of
these functions might be outsourced, it is the CIS manager who directs activities.
Most of the older management companies started as insurance companies (Old Mutual,
Sanlam, Liberty) or banks (RMB, Absa, Standard Bank). Changes in legislation also broadened the
participation in the industry, allowing new players, like institutional fund managers Allan Gray
and Coronation, to launch unit trust funds. More recently it has become common for boutique
asset managers to launch their own suites of unit trusts, usually with the help of third-party
administrators.
Media coverage of unit trusts in financial magazines and the newspapers is disproportionate to
the size of the unit trust industry. Assets held by the pension fund industry, for example, are
roughly one-and-a-half times those of collective investment schemes, and both are dwarfed by the
market capitalisation of the JSE. But in spite of its smaller size as an industry, collective
investments get a lot of attention online and in the press.
One reason for this is that unit trusts are seen as the “shop window” of the asset management
business. An investment house’s unit trusts are the most visible display of their overall investment
expertise – and sometimes the same asset management team controls the life products and the
unit trust portfolios. Even where this is not the case, the performance of unit trusts, which have
relatively strict disclosure requirements, are used (rightly or wrongly) as a barometer for the
success of the asset management skill of fund managers in other investment arenas at
the same company. There are no equivalent industry accepted performance league
tables for the life insurance industry or the pensions
industry.
Boutique Funds
An interesting trend in asset management
The term ‘boutique’ is a popular companies has been the use of “outsourcing”.
prefix, whether affixed to hotels,
banks or vintners. In the financial world it Outsourcing of fund management was probably
denotes a small, specialised investment firm. introduced about 15 years ago and has become more
Boutique fund managers usually focus on popular, for different reasons, since then. The first
narrow market segments which are not fully company to outsource fund management was a bank
serviced by larger companies. Typically, with a loyal client base, which realised that they had
boutique fund managers are nimble compared a captive market for a range of investment products,
to heavyweight funds. They are usually run by and no in-house expertise in this area. Introducing
small teams or individual asset managers, unit trust funds, the management of which was
allowing for quick decision-making and prompt outsourced, was a neat solution.
implementation of portfolio strategies. Often the One of the more recent drivers in the
investment team are the owners of the
business, and therefore more directly affected outsourcing trend has been the shortage of
by fund performance than their counterparts in experienced fund managers.
larger investment houses.

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