Page 77 - Profile's Unit Trusts & Collective Investments - September 2025

The CIS industry Chapter 4

R How distributions are to be calculated and settled
R The limits, terms and conditions under which scrip may be lent
R The limits, terms and conditions under which a manager may, for the account of a portfolio,
borrow money
R The charges that may be levied and the method of calculation of those charges
R The manner in which the deed may be amended
Every deed must compel the CIS manager to repurchase all participatory interests offered to it.
As part of the deed, the CIS manager must define exactly how repurchases will work – by what time
a repurchase request must be received, and what valuation point applies to each repurchase (based
on the time stamp of the request). The deed is submitted to the Registrar for approval before a fund
is launched.
A supplemental deed contains changes or additions to the original deed. This could relate to any
aspects of the deed, but often arises when a management company launches a new fund or new
unit class. Rather than start from scratch, the manager lodges a supplemental deed that sets out
the requirements, in terms of the Act, not already covered in the first deed or previous supplemental
deeds. For an existing fund, a supplemental deed is drawn up to change existing terms or to add new
provisions. Examples would include a change in the fee structure, the addition of a performance fee,
a change of benchmark, or even a change in the name of the management company. A majority in
value of investors must assent to any amendment in the deed and its associated supplemental deeds.
Asset managers
The asset manager (individual or team) of a CIS may be part of the CIS manager or a separate
asset management company appointed by the CIS manager to handle the portfolio. Examples of
asset management firms in SA include; OMIGSA (Old Mutual Investment Group South Africa),
Ninety One Fund Managers and Momentum Collective Investments.
From the investor’s point of view – assuming the investor is in no doubt about the soundness of
the fund – the asset manager is the key component, for it is the asset manager who will determine
the investment returns of the portfolio.
Asset managers often employ analysts to stay abreast of economic and political developments
which may affect investment opportunities, and of factors affecting particular industries and business
sectors. Armed with this information, asset managers try to select investment opportunities which
will deliver above-average returns.
There are many approaches to asset management, and not all fund managers aim to be “experts”
on the economy and business. The manager of a tracker fund, for example, uses computer models
to replicate an index. These are also called “passive” funds, because the asset manager does not
make active choices about asset allocation based on expert knowledge. Some asset management
companies use a “team” approach, where no one individual runs a fund; others prefer the
philosophy of definite responsibility, and give one portfolio manager overall authority to make
investment decisions.

Fund mandates
While asset managers obviously seek to obtain the best returns for investors, they must also
operate within the fund mandate.
The mandate is a document prepared by the CIS manager describing the objectives and
investment parameters of a fund. This is lodged with the FSCA and must be signed by both the
CIS manager and the portfolio manager. It is regarded as a public document, and must be made
available to any investor upon request.
Although investment policies are defined in the deed, the industry uses mandates to define
objectives and parameters more narrowly (CISCA allows a fairly broad definition of investment
policies in the deed). ASISA describes the mandate as a “definitive document reflecting the
fund’s main characteristics and a signed commitment of both the management company and
asset manager”.

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