Page 159 - Profile's Unit Trusts & Collective Investments - September 2025

Classification of CISs Chapter 8

The Multi Manager fund tries to capitalise on these different strengths by outsourcing the
management of the fund to two or more complementary managers or investment houses.
Multi Managed funds typically have a greater level of diversification compared to single manager
funds and therefore lower active risk (ie, non-market risk) than single manager funds.
There are two main types of Multi Manager funds: Fund of Funds and “manager of managers”
type funds. Note that not all Fund of Funds are explicitly Multi Manager funds in the true sense: to
qualify as a Multi Managed fund the manager must be choosing underlying funds specifically on
fund manager and style criteria rather than asset allocation criteria.
Exchange Traded Funds (ETFs)
Exchanged Traded Funds (ETFs) are funds which are Exchange Traded Funds
listed on a stock exchange and can be traded like a share. An Exchange Traded Fund (ETF) is a
Initially ETFs were tracker or index funds offered at low fund which tracks an index but which
cost. can be traded on a securities exchange
Recently, however, actively managed ETFs have been like a share. This allows investors to buy ETFs through
launched that are managed by fund managers with the a stockbroker, although some ETFs can also issue
expertise to pick securities. units or shares directly. Relatively niche products
20 years ago, ETFs are now a major – and booming
The majority (but not all) ETFs listed on the JSE are – investment category. Recently passive funds in the
also registered as collective investment schemes, in US have dominated investor interest, soaking up the
effect creating two markets for these funds. lion’s share of inflows.
SA’s first ETF, the Satrix 40, was launched
in November 2000. It tracks the FTSE/JSE
Top 40 index. Since the launch of the Satrix 40 the JSE’s ETF sector has grown to 121 funds by June
2025, including sector-specific ETFs, funds that track overseas and global indices, and even a fund
that tracks the rand. The Actively Managed ETF sector had grown to 28 funds by August 2025.
From a fund management point of view, most ETFs are very similar to other index funds: they
replicate the weighted constituents of an index in a physical portfolio, benefiting from market
movements, and collecting and paying dividends.
The new Actively Managed ETFs are similar to actively
managed unit trust funds, but the managers can choose Exchange Traded Notes
whether to declare holdings quarterly or daily, but intraday (ETNs)
net asset values must be published at least three times
a day. Like an ETF, an Exchange Traded Note
A number of Actively Managed ETFs are those (ETN) is an Exchange Traded Product
(ETP). From the investor’s point of view, an ETN
focussed on providing income, while others are global looks very much like an ETF: it typically tracks an
funds offering exposure to global markets in rands. index, forex rate or commodity price, and it can be
From the investor’s point of view, ETFs have traded on the stock exchange like a share. The key
several features which differentiate them from difference between ETFs and ETNs is that with ETNs
unit trusts. the underlying assets do not belong to the investors.
R ETFs can be bought and sold through a stockbroker Technically, an ETN is not a collective investment
as they trade all day like any other share so scheme but a debt instrument – a promise made
investors can take advantage of intraday market by an underwriting bank to pay to the holder of
movements and the ETF prices are always visible the ETN an amount equivalent to the movement in
and transparent. Unit trusts effectively only trade the reference index, rate or price, less fees. ETNs are
once a day after the market closes. therefore subject to credit risk (ie, the risk of default).
R Unit trust investors buy and sell at the previous A major advantage of ETNs is that they offer retail
day’s “closing price” (ie, the NAV unit price as investors access to otherwise inaccessible asset
calculated by the fund). ETF investors trade at a categories (such as specific commodities and frontier
market price determined by supply and demand markets). They also offer a low tracking error (ie, the
(although this is usually very close to NAV). issuer undertakes to match the movement in the
underlying security, so that before the deduction of
fees the tracking error is zero).

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