Page 142 - Profile's Unit Trusts & Collective Investments - September 2025

Chapter 8 Classification of CISs

Total return index (TRI)
A TRI, or total return index, is one which reflects both capital gains and income yield in one
value stream. Most indices quoted in the media are price-based (ie, they are calculated
from price data only). The FTSE/JSE Top 40 index (code J200), for example, is essentially the
average price of the top 40 JSE shares weighted according to market cap. The TRI version, however
(code J200T), adds to these aggregated price movements the effect of dividends paid by the underlying
companies. Typically this is done by reinvesting the income yield into the price stream. The impact of
the reinvestment of dividends can be significant. In the five-year bull run from April 2003 to May 2008,
for example, the JSE’s All Share index rose 351%. The Alsi TRI, however, rose 419%, adding 19% to
investment returns. The impact of dividends increases over time. In the decade from January 2003 to
December 2012, for example, the Top 40 index rose 301% while the Top 40 TRI rose 429%, adding 43%
to investment returns.
The codes for FTSE/JSE indices append the letter “T” to denote TRI indices (eg, J203T for the
FTSE/JSE All Share TRI index).

fund, at the discretion of the fund manager. As of
P/E ratio October 2024 there are nine sub-sectors in this
category, making up the third level of classification.
The price/earnings ratio (also called Some examples of these sub-sectors (dealt with more
the P/E ratio or P/E multiple) is simply fully below) are Large Cap funds and Resource funds.
the price of a share divided by its
earnings (after-tax profits) per share. The P/E ratio Effective 1 October 2025, two new categories for funds
gives investors an idea of how much they are paying invested 100% in SA will be introduced: South African–
for a company’s earning power. For example, a share Equity–SA Large Cap (rename of existing) and South
selling for R20 with earnings per share of R1 last year, African–Multi Asset–SA Income. A new category will be
has a historical P/E ratio of 20. If the same share has added to Global Equity: Global–Equity–US.
a projected earnings per share of R2 for the following For themed funds, 100% of the equity portfolio
year, it will have a forward P/E of 10. The higher the (previously a minimum of 80%) must be invested in
P/E, the more “expensive” a share relative to its profits. securities that fall within the theme (eg, financial shares
A high P/E usually suggests the market is expecting or industrial shares) at the time of purchase. For example,
good profit growth from the company. a Resource fund must be at least 80% in equities at all
times (as per the first-tier rule) and all of the equities must
be resource shares. (More detail below.)
Multi Asset funds (previously Asset Allocation)
Market capitalisation invest in a spread of investments in the equity, bond,
Market capitalisation, or market cap money and property equity markets. These funds seek to
for short, is a measure of a listed maximise their total returns (ie, both capital appreciation
company’s value, calculated by and income growth) over the long term. At the third
multiplying the number of outstanding ordinary level, this sector has had seven sub-sectors since
shares by the current market price per share. October 2024: Flexible funds, High Equity funds,
Listed shares are usually grouped into four main High Equity SA funds, Medium Equity funds, Low
market cap categories: large cap, mid cap, small cap, Equity funds, Income funds and Unclassified funds.
and micro cap. As discussed elsewhere, Prudential funds, which
previously had their own sub-sectors within Asset
Allocation, are now referred to as Regulation 28 compliant funds and are “flagged” as compliant
regardless of which sector they are in. Certain Income funds, previously classified as Fixed Interest
Varied Specialist funds under the Interest Bearing (then Fixed Interest) category; were moved to
the Multi Asset sub category because these Income funds contain small holdings in high dividend
shares or other assets that cannot strictly be defined as interest bearing securities.
Interest Bearing funds (previously Fixed Interest) invest in bonds, money market instruments
and other interest bearing securities. At the third level there are five sub-sectors in this category:
Variable Term funds, Variable Term Inflation-Linked Bond funds, Short Term funds, Money Market
funds and Unclassified funds.

140 Profile’s Unit Trusts & Collective Investments September 2025