Page 139 - Profile's Unit Trusts & Collective Investments - September 2025

Classification of CISs Chapter 8

Capped fund
A capped fund is a fund which is closed to new investment. Both SA-domiciled and offshore
funds may be capped when they get too big (mainly because a large fund can be difficult
to manage). This usually does not affect existing debit order clients.
SA-domiciled funds in the Global category depend on the asset swap capacity of the management
company. When this limit is reached, the fund is forced to turn away new investment.
It is important to note that the classification standard is not designed to cover all types of unit trusts
and collective investment schemes, only to group funds in such a way that they are comparable in
terms of risk and performance. Funds of funds (FoFs), for example, do not have their own sector
because a FoF represents a method of holding assets, not a defined investment universe or a
limitation on asset allocation. FoFs can be found in several Equity sectors, in most of the Multi Asset
sectors, and even in the Interest Bearing sectors.
The test is what assets are held, not how they are held. Similarly, index funds – although they have
distinct features which distinguish them from other funds – are heterogeneous when it comes to
underlying assets. Some index funds track domestic equity indices, others track bond indices, and
still others track global indices.
To assist investors to identify types of funds that span a variety of categories, the ASISA Guideline
on the Naming of Collective Investment Scheme Portfolios requires that fund names incorporate
distinguishing words and phrases:
R A FoF must have “fund of funds” in its name
R Index funds must contain the word “index”, “tracker”, “index tracker” or “passive”
R Money market fund names must contain “money market”
R Feeder portfolios must contain the phrase “feeder fund”
R Exchange traded funds must contain the words “exchange traded fund”, “ETF”, or “actively
managed ETF”
R A cash fund holding instruments with a maximum maturity of 21 days must use the word “cash”
R A retail investor hedge fund must use that label or the acronym RIHF and a qualified investor
hedge fund must use that label or the acronym QIHF
R A side-pocket or retention fund must use this label
Funds may only use the term “institutional” if they are exclusively available to financial institutions
regulated by any law, for example, retirement funds, long term insurers, investment managers and
CISs. If a fund has a retail class it cannot be called institutional.
Rankings and comparisons
An important objective of any classification standard is to facilitate comparison of like with like.
Unit trusts in a sector such as Equity General, for example, can be ranked to show the best and
worst performing funds over a range of periods. Given that all the funds in the sector must choose
from the same investment universe and must comply with the same asset allocation rules, such
a comparison reveals which manager has done the best job. The same is not true, however, if
comparisons are made across sectors. Ranking the performance of, say, an equity fund and an
interest bearing fund might provide insight into the comparative performance of the stock market
and the money market but it says nothing about the performance of the respective managers – the
state of their mandated investment universes will have a far greater impact on fund performance
than any investment decisions they make.
In line with the principle of comparability, certain sectors should not, according to the ASISA
standard, be ranked. These include the “Unclassified” categories, which typically contain a mix of
heterogeneous funds that cannot be accommodated elsewhere in the sector structure – typically
because there are not enough funds of that type to justify a separate category.

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