Page 143 - Profile's Unit Trusts & Collective Investments - September 2025

Classification of CISs Chapter 8

Real Estate funds invest predominantly in listed property shares, either directly or via other
collective investment schemes in property or real estate investment trusts.
In the remainder of this chapter, we look at each second-tier category in detail, starting with the
Equity funds. Remember that each of the second-tier categories can be associated with each of the
first-tier categories. So, for example, you can have South African Equity funds, Worldwide Equity
funds and Global Equity funds.
Equity funds

General funds
These are funds that invest in selected shares across all industry sectors of the equity markets,
as well as across the range of large, mid and smaller capitalisation shares. They may or may not
subscribe to a particular theme or investment style and can hold a mix of value and growth shares
across any range of JSE sectors. As mentioned above, as for all equity categories, 80% of assets
must be invested in shares at all times.
The funds have a medium- to high-risk profile, offering medium to long-term growth as their
primary investment objective. The mandates of some general equity funds allow fund managers to
have a small percentage of their assets in bonds and derivatives.
General equity fund managers are required to take a view on the changing macro-economic
climate, and decide which sectors will perform well in different economic environments.
They are also required to have the skills to choose particular shares within these sectors. For a
South African– Equity–General fund typical benchmarks are the FTSE/JSE All Share index (J203T),
the Shareholder Weighted All Share index (J403T1) and the Capped Shareholder Weighted All
Share index (J433).

Growth and Value funds
Up until the end of 2012 the ASISA classification standard included categories for Growth funds
and Value funds. As part of the 2013 revision these sectors were done away with and the constituent
funds moved to other categories (mostly General Equity). This was in line with the policy of moving
away from style categories.
Since then the number of managers practicising these two styles of investing has declined
and there are now only a few funds contaiing either “growth” or “value” in the fund name in the
South African–Equity–General sector. Since there are no longer Growth and Value sectors there
are no more defining criteria for these funds and neither the ASISA classification standard nor the
ASISA Guideline on the Naming of Collective Investment Scheme Portfolios contain rules about the
use of “growth” or “value”. Investors and advisers therefore need to look to individual fund mandates
to gauge the extent to which these funds adhere to value or growth investing principles.
In the main, Growth funds aim for maximum capital appreciation through investment in “high
growth” companies, although not all asset managers agree on the precise definition of growth
shares. They are normally characterised as the “blue chips” of the future, the companies that are
expected to produce dramatic profit growth from one year to the next. In terms of the now defunct
category definition, a manager, in determining whether a company qualifies as a “growth” share, was
required to take into consideration the two-year historical earnings growth of the company and the
projected growth based on industry consensus earnings forecasts. In short, growth shares should
have earnings (profits) that are in, and are expected to continue, a strong and sustainable upward
trend. Mining and commodity shares are usually excluded due to the cyclical nature of earnings.
Value funds seek out “value” by investing in shares with low relative P/E (price/earnings) ratios,
shares trading at a discount to their net asset values, or shares with dividend yields significantly
higher than the market average. Value fund managers often try to identify changing industry or sector
circumstances which signal a re-rating of shares in those sectors. These funds aim for medium to
long term capital appreciation and they frequently offer a higher than average level of income.

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