Page 28 - Profile's Unit Trusts & Collective Investments - September 2025

Chapter 1 History of collective investment schemes

Lessons from 1969
Bull market The crash of 1969 in SA was certainly a bad one.
A persistent and prolonged period of Judged by the JSE Overall index (as the JSE All Share
rising market prices. In the financial index was then called), and ignoring dividends, the share
markets, a bullish person believes market took around 10 years to get back to the levels it
that prices are about to rise. A bull trend is therefore a had reached in 1969. Investors who bought at the peak,
trend that is moving upwards. A period of rising prices in May 1969 (and, unfortunately, there were a lot of them)
could also be referred to as a bull run or a bull phase. had to wait 10 long years to see a real return on their
The opposite of a bull market is a bear market. investment. Most didn’t wait, choosing rather to take
their losses, further fuelling the decline in prices.
The crash had long-lasting negative effects. It
Market bubble scared many people away from excellent investment
A market bubble refers to an opportunities available in the early 1970s, and inhibited
the development of new products for over a decade.
unsustainable surge in asset prices
that has no solid basis. Soaring Yet with the benefit of hindsight one of the lessons of
valuations are followed by dramatic collapses. Famous the 1969 crash is the resilience of equity markets over
examples are the Tulip Bubble (1637), the South time. As they have in all other equity market crashes,
Sea Bubble (1720), and the Dotcom Bubble (2000). share prices did recover and surpassed their former
Market mania can take several years to play out. dizzy heights. Other important lessons were learned
about how not to invest in unit trusts.
The worst losses were suffered by investors who got into the market in the final bull phase.
Industry asset doubled in the last five months of the bull run, and unit prices rose by an average of
36% at a time when inflation was only 3.4%. The huge inflows in May meant that many investors had
entered the market at its most expensive. Investors who invested before the final bull phase – or who
staggered their purchases – were not nearly as hard hit when the bubble burst. In fact, an investor
putting a level monthly amount into the market from June 1965 to February 1972 would only have
been in the red for 13 of 81 months, and in only one of those months would the decline in portfolio
value (compared to the amount invested) have exceeded -10%.
With the decline in share prices, share market dividend yields rose significantly. An investor who
entered the market in 1968 and who reinvested dividends and interest income from unit trusts would
have been showing a real return in five or six years. While this might sound like a long time, it must
be remembered that this was against the background of a severe economic recession and a major
share market crash.
Positive effects of the 1969 crash were therefore:
R An appreciation of the dangers of market bubbles, and the need to stagger investments,
especially large lump sum investments.
R A general acceptance that equity investments, and unit trusts in particular, need to be treated
as long-term investments (ideally five years or more).
R More responsible marketing by the industry, which has ever since made a greater effort to
caution investors against the dangers of buying high and selling low.
An explosion of funds
Growth in the industry, for all the reasons stated above, was very slow during the 1970s. Only three
funds were launched between the crash of 1969 and the end of the next decade, taking the total
number of funds from 9 to 12. Standard Bank launched SA’s 13th fund (a gold fund) in October 1982.
The unit trust industry came to life again in the second half of the 1980s, following the fortunes of
the share market, which had entered a new bull phase.
A total of 12 funds had been launched in the 15 years between 1965 and 1980. In 1987, as
the JSE followed overseas markets to dizzy heights, 11 funds were launched in one year alone.
By September 1987, industry assets had grown to R4.8bn. From 12 funds in 1979 the industry had
grown to 31 funds by 1989 (most of these launched from April 1987 onwards).

26 Profile’s Unit Trusts & Collective Investments September 2025