Page 141 - Profile's Unit Trusts & Collective Investments - September 2025

Classification of CISs Chapter 8

The large variety of CISs available means that investors and financial advisers must be
well-informed in order to choose appropriate investments. Investors and financial advisers
(FAs) must be aware of the mandates, investment risks and tax implications associated
with each category. The full classification standard is available on the ASISA website.
It is a comprehensive document. Although aimed principally at fund managers it is a useful reference
for FSPs. It is important that investors buy collective investments that are compatible with their
risk profiles.

Worldwide funds are funds which invest in both South African and foreign markets. These
funds have total flexibility as to where they invest – they can have 100% of their assets offshore,
or 100% in SA, or any mix in between, depending on their view of local and overseas markets, the
rand and other factors. (For the record, a minimum of 15% each way was required prior to 2003,
and a minimum of 30% each way until June 2005.) Some management companies offer investors
the option of investing in Worldwide funds while they are waiting for space in a capped Global
fund, on the understanding that as soon as there is capacity in the Global fund the investment will
be switched.
Global funds (previously known as Foreign funds) are funds that invest at least 80% of their
assets (previously 85%) outside SA at all times. In the case of Global–Equity–General funds,
no more than 80% of the assets may be invested in one geographic region, but in the case of
Global –Equity–Africa funds, at least 80% must be invested in Africa.
Exchange control regulations are still in place in SA, but have been steadily relaxed since 2001.
Individuals are now allowed to expatriate R1m a year for investments and other purposes and can
apply to the South African Reserve Bank to expatriate a further R10m. Even higher amounts may be
allowed for investments that meet certain requirements.
Investors can also invest offshore using financial services companies’ asset swap mechanisms.
Local unit trust managers are permitted to swap a portion of the total SA assets they hold for
assets offshore. They can then offer this to investors as rand-denominated funds with exposure to
investments in offshore financial markets.
Until February 2022, unit trust companies could swap 40% of the investments they received
from individual investors into foreign markets and a further 10% into Africa. This changed to 45% in
February 2022 in line with the prudential limits for retirement funds.
The asset swap allowance is calculated for a CIS manager, not a fund. The allowance can be used
to create a single “offshore” fund in the CIS manager’s suite of funds, or the CIS manager can choose
to allocate bits of the offshore allowance to different funds. The CIS manager is obliged to close the
fund to new investments if the maximum offshore “allowance” has been reached. However, as the
assets under management grow, it can “uncap” its foreign funds and open them to new investment
– until the limit is reached again.
Regional funds were funds that invested at least 80% of their assets in a single country or region,
excluding SA, at all times. These unit trusts will now be classifed as Global funds.
As with all funds in the Unclassified sectors, investors must exercise caution when comparing
funds that focus on a particular region as they may focus on different geographic areas. A Japan
fund, a US fund and a Eurostoxx fund, for example, are not comparable in the same way as
South African–Equity–General funds. Where the latter will reveal differences in fund management
approach and ability, the former will be largely dependent on the performance of stock markets in
those respective countries.
Second and third tiers
At the second level, funds are divided into four main groupings: Equity funds, Multi Asset funds
(previously Asset Allocation), Interest Bearing funds (previously Fixed Interest) and Real Estate
funds.
Equity funds are funds that are obliged to invest a minimum of 80% of their assets (previously
75%) in equities at all times. The remaining 20% can be invested, subject to the mandate of the

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