Page 145 - Profile's Unit Trusts & Collective Investments - September 2025

Classification of CISs Chapter 8

Considering that the smallest 50 JSE companies have a combined market cap of under R6bn,
companies worth R100bn on average are not that small.
Benchmarks for these funds vary. The most common is a combination of small and mid cap
indices, but some CIS managers use the FTSE/JSE All Share index, and the median performance of
funds in the sector is also used. ASISA no longer publishes benchmarks for the unit trust categories,
but previously it used the FTSE/JSE Mid Cap index (J201T).
Resources funds
Resources funds seek capital appreciation by investing in shares of companies engaged in the
exploration, mining, distribution and processing of metals, minerals, energy, chemicals, forestry or
other commodities. At least 80% of assets must be in shares listed in the FTSE/JSE Oil & Gas and
Basic Materials industry groups (or, for non-SA funds, in a similar sector of an international stock
exchange). Up to 10% of assets may be invested in shares in other sectors provided the companies
conduct similar business activities as those in the defined sectors. Examples of these might be
food-type commodity shares, or companies like PPC, a cement company listed in the JSE Building
and Construction Materials sector.
The performance of mining and resource funds is generally linked to commodity prices and
world GDP growth. In SA, foreign exchange fluctuations (ie, the relative strength of weakness of
the rand in relation to other currencies) adds a second layer onto the performance of the sector.
Some fund managers add performance to their funds by “derivative hedging” (ie, selling short) if
the resources index is going down. Individual resource categories tend to have different cyclical
patterns, which have to be managed by the fund managers to the best advantage of the fund.
Funds in the South African–Equity–Resource sector often use the FTSE/JSE Resources index
(J258T) as a benchmark.
Gold funds
Gold funds previously had their own sector. Only one South African gold fund remains and is now
classified as a worldwide fund. The decline of SA as one of the world’s leading suppliers of gold has
been accompanied by diminishing interest in these funds.
The gold mining industry in SA has consolidated dramatically over the last decade. There are
currently only a handful of JSE listed stocks, reduced from over 60 some 20 years ago. This has
made it increasingly difficult for gold fund managers to stick to regulations which limit investment in
any one company. In 1999 gold fund managers successfully petitioned the FSCA to exempt them
from regulations that restrict investment in any one company to a maximum of 10% of the fund, but
this failed to halt the demise of these funds.
Gold funds perform well when the gold price is rising or expected to rise. SA has two ETFs that
invest directly in gold bullion, but these commodity ETFs are not unit trusts. Overseas mutual funds
and ETFs invest in gold mining companies offering exposure to major international gold miners like
Newmont and Barrick as well as South African counters.
Financial funds
These theme funds invest in financial sector companies, including banks, insurance companies,
brokerage firms and other companies whose principal business operations involve the provision of
financial services.
For funds in the South African–Equity–Financial sector, at least 80% of assets must be invested
in shares listed in the FTSE/JSE Financials industry group (or in a similar sector of an international
stock exchange for non-SA funds). Up to 10% of assets may be invested in shares that are not listed
in the Financials sector provided the companies have business activities in line with the theme. Due
to the narrower focus of these funds they may be more volatile than better diversified portfolios.
For many funds in the South African–Equity–Financial category the benchmark is the
FTSE/JSE Financials index (J580T).

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