Page 61 - Profile's Unit Trusts & Collective Investments - September 2025

Costs and pricing Chapter 3

fees. The standard aims to embed the principles of fairness, consistency, transparency, accuracy,
completeness and appropriateness in the design, calculation and disclosure of performance fees.

Portfolio charges
Portfolio charges refer to certain costs incurred in securities trading and administration which
managers may levy directly against the fund.
Up until 2002, all equity-based unit trust funds levied so-called “compulsory charges”,
which usually amounted to about 0.7% of the amount invested. (Tracker funds charged the same
level of compulsory charges, as the brokerage costs for buying underlying shares were typically the
same as for actively managed funds.) This charge was designed to cover the costs to the fund of
purchasing securities.
These costs consist of:
R Securities transfer tax (STT): 0.25%
of the value of share purchases (not
sales).
R Brokerage charges levied by the
stockbroking firm: anywhere from a
fraction of a percent (discount brokers)
to 1.0% (full service brokers).
R STRATE Settlement costs: 0.005787%
but capped at R98.04 per trade (min
R7.45)
R Investor protection levy: 0.00029% of
the transaction value.
CISCA did away with “compulsory charges”. Instead, various costs associated with portfolio
management (including the transaction costs listed above) may be charged directly to the portfolio
by the manager.
This differs significantly to what happened with “compulsory charges”, where the management
company collected a set fee whenever units were purchased, regardless of the actual costs of buying
securities. The “compulsory charges” accumulated in the management company’s own coffers,
and the costs of buying and selling securities were paid by the management company from these
fees. Under CISCA, brokerage and other costs are simply charges against the portfolio itself and
form part of the total fund expenses. These are, of course, a direct charge against fund performance.
Hopefully this gives fund managers an incentive to monitor costs, to keep costs as low as possible,
and to avoid any unnecessary turnover in holdings.
In terms of CISCA (Section 93), the amounts which a manager is entitled to deduct from a portfolio
are as follows:
R All charges payable by the manager in the process of buying and selling securities and other
assets for the portfolio. These include:
„ brokerage
„ marketable securities tax
„ value added tax
„ stamp duties
R Auditor’s fees, bank charges, trustee and custodian fees and other levies or taxes.
R Share creation fees payable to the Registrar of Companies for the creation of authorised
capital or, in the case of a collective investment scheme in property, the costs incurred in the
creation and issue of participatory interests.
R The agreed and disclosed service charges of the manager (ie, the “annual service fees”
discussed in the previous section).
R Any costs incurred as a result of a collective investment scheme in property.

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