Page 148 - Profile's Unit Trusts & Collective Investments - September 2025

Chapter 8 Classification of CISs

Regulation 28 funds
Regulation 28 of the Pension Funds Act stipulates prudent investment limits that must be
adhered to by managers of retirement funding vehicles (such as pension funds, provident
funds and RAs). The Regulation 28 rules also apply to unit trusts and other collective
investment schemes that wish to attract retirement savings.
A revised Regulation 28, which became effective on 3 January 2023, introduced some important
changes for pension funds, as shown in Table 8.2. It is important to note that the FSCA regulations governing
collective investment schemes take precedence over Regulation 28. For example, although Regulation 28
now allows pension funds and other retirement vehicles to invest directly in commodities, FSCA rules
do not allow unit trusts to do this. However, where a Regulation 28 limit is more restrictive than the
FSCA regulations governing unit trusts, a Prudential fund would have to comply with Regulation 28.
As one fund manager puts it, where more than one code is applicable, the fund manager must always
apply the more stringent rules.
It should be noted that the “prudential” environment extends beyond those funds flagged as
Regulation 28 compliant. Most LISPs offer wrappers and other retirement products that allow investors
to select from a range of unit trusts – in order to meet Prudential Requirements the aggregate exposure
to each asset class across the consolidated portfolio must comply with Regulation 28. Regulation 28
compliant funds may or may not form the backbone of a retirement funding strategy; a “prudential”
portfolio can also be constructed by combining different types of funds – money market, multi asset,
equity and bond funds – within a retirement wrapper.

R The separation of hedge funds and private equity from “other assets,” each with distinct
allocation limits.
R Adjustments to foreign exposure, unlisted assets, and housing loans, along with a new issuer
concentration cap.
R An explicit prohibition on crypto assets for pension funds.
These 2023 amendments mean that while the ASISA classification flag still identifies
Regulation 28 compliance, the underlying rules defining compliance have evolved, and fund
allocations must now reflect the updated limits and new asset categories.
The South African–Multi Asset category has since 1 October 2024 included the following sectors:
R Multi Asset – Flexible funds
R Multi Asset – High Equity funds
R Multi Asset – SA High Equity funds
R Multi Asset – Low Equity funds
R Multi Asset – Income Funds
R Multi Asset – Unclassified
The equity exposure bias in the sector names – a feature preserved from the old prudential
categories – is designed to reflect different levels of risk. Equities are generally the most volatile asset
class and equity exposure is therefore the predominant
source of risk in a multi asset portfolio. Although not an
Basis point absolute indicator of the risk associated with any one
A basis point is one one-hundredth of category, it does group the funds more meaningfully than
1%. Basis points are used to express if they were in one sector.
interest rate changes and yields that Prior to 2013 a category existed under Asset Allocation
are less than one percent; 1% equals 100 basis points. for Targeted Absolute and Real Return funds. Added in
A move in a bond yield from 10.96 to 10.97 is a one 2003, the sector catered for funds that aimed to beat
basis point move. inflation or to achieve a defined minimum return. The
typical benchmark of an absolute or real return fund is
CPI plus a real return target. As part of the 2013 classification revision these funds were moved to
other appropriate Multi Asset sectors based on their defined mandates.

146 Profile’s Unit Trusts & Collective Investments September 2025