Page 136 - Profile's Unit Trusts & Collective Investments - March 2026

Chapter 8 Classification of CISs

Total return index (TRI)
A TRI, or total return index, is one which reflects both capital gains and income yield in one
value stream. Most indices quoted in the media are price-based (ie, they are calculated
from price data only). The FTSE/JSE Top 40 index (code J200), for example, is essentially the
average price of the top 40 JSE shares weighted according to market cap. The TRI version, however
(code J200T), adds to these aggregated price movements the effect of dividends paid by the underlying
companies. Typically this is done by reinvesting the income yield into the price stream. The impact of
the reinvestment of dividends can be significant. In the five-year bull run from April 2003 to May 2008,
for example, the JSE’s All Share index rose 351%. The Alsi TRI, however, rose 419%, adding 19% to
investment returns. The impact of dividends increases over time. In the decade from January 2003 to
December 2012, for example, the Top 40 index rose 301% while the Top 40 TRI rose 429%, adding 43%
to investment returns.
The codes for FTSE/JSE indices append the letter “T” to denote TRI indices (eg, J203T for the
FTSE/JSE All Share TRI index).

Equity funds are funds that are obliged to invest
P/E ratio a minimum of 80% of their assets (previously
75%) in equities at all times. The remaining 20%
The price/earnings ratio (also called can be invested, subject to the mandate of the
the P/E ratio or P/E multiple) is simply fund, at the discretion of the fund manager. As of
the price of a share divided by its October 2024 there are nine sub-sectors in this category,
earnings (after-tax profits) per share. The P/E ratio making up the third level of classification. Some
gives investors an idea of how much they are paying examples of these sub-sectors (dealt with more fully
for a company’s earning power. For example, a share below) are Large Cap funds and Resource funds.
selling for R20 with earnings per share of R1 last year,
has a historical P/E ratio of 20. If the same share has Effective 1 October 2025, two new categories for funds
a projected earnings per share of R2 for the following invested 100% in SA will be introduced: South African–
year, it will have a forward P/E of 10. The higher the Equity–SA Large Cap (rename of existing) and South
P/E, the more “expensive” a share relative to its profits. African–Multi Asset–SA Income. A new category will be
A high P/E usually suggests the market is expecting added to Global Equity: Global–Equity–US.
good profit growth from the company. For themed funds, 100% of the equity portfolio
(previously a minimum of 80%) must be invested in
securities that fall within the theme (eg, financial shares
or industrial shares) at the time of purchase. For example,
Market capitalisation a Resource fund must be at least 80% in equities at all
Market capitalisation, or market cap times (as per the first-tier rule) and all of the equities must
for short, is a measure of a listed be resource shares. (More detail below.)
company’s value, calculated by Multi Asset funds (previously Asset Allocation)
multiplying the number of outstanding ordinary invest in a spread of investments in the equity, bond,
shares by the current market price per share. money and property equity markets. These funds
Listed shares are usually grouped into four main seek to maximise their total returns (ie, both capital
market cap categories: large cap, mid cap, small cap, appreciation and income growth) over the long term. At
and micro cap. the third level, this sector has had eight sub-sectors since
October 2025: Flexible funds, High Equity funds,
High Equity SA funds, Medium Equity funds, Low Equity funds, Income funds, SA Income funds
and Unclassified funds.As discussed elsewhere, Prudential funds, which previously had their own
sub-sectors within Asset Allocation, are now referred to as Regulation 28-compliant funds and are
“flagged” as compliant regardless of which sector they are in. Certain Income funds, previously
classified as Fixed Interest Varied Specialist funds under the Interest Bearing (then Fixed Interest)
category; were moved to the Multi Asset sub category because these Income funds contain
small holdings in high dividend shares or other assets that cannot strictly be defined as interest-
bearing securities.
Interest Bearing funds (previously Fixed Interest) invest in bonds, money market instruments
and other interest-bearing securities. At the third level there are five sub-sectors in this category:

134 Profile’s Unit Trusts & Collective Investments March 2026