Page 146 - Profile's Unit Trusts & Collective Investments - March 2026

Chapter 8 Classification of CISs

because of the higher interest rates. As described in Chapter 7, Money Market funds use a system
of constant unit pricing which protects investors from any risk of capital loss.
A common benchmark for South African funds is the STeFI 3-month index.
Real Estate funds
The Real Estate category has only one General sector. Currently there are funds in two categories
at the geographic level, meaning that there are effectively two sectors: Global–Real Estate and
South African–Real Estate.
Real Estate–General funds invest in listed property shares, including real estate investment trusts
(REITs) and other collective investment schemes in property. The objective of these funds is to
provide high levels of income and long-term capital appreciation. These portfolios invest at least
80% of the market value of the portfolio in shares listed in the FTSE/JSE Real Estate industry group
or similar sector of an international stock exchange and may include other high-yielding securities
from time to time. Up to 10% of a portfolio may be invested in shares outside the defined sectors
in companies that conduct similar business activities as those in the defined sectors. A common
benchmark for South African funds is the FTSE/JSE SA Listed Property index (J253T).

Hedge funds
Hedge funds are a popular form of collective investment
scheme in most developed countries. Hedge funds typically use
leveraged strategies, including net short positions, to make profits.
These strategies, which often involve derivatives (such as
futures and options), mean that a hedge fund can suffer losses
greater than its aggregate market value. Most Hedge funds are
structured in such a way, however, that investors are protected
from losses that exceed their capital investment.
A well-run hedge fund should, in theory, be less risky than an
equity fund. A key feature of hedge funds is that they are the
only mainstream investment vehicles able to generate positive
returns when markets are falling.
Globally, the hedge fund industry is a force to be reckoned
with. There are well over 100 000 investment funds available
worldwide – and more than one in 10 is a Hedge fund.
According to ASISA statistics, the South African hedge
funds industry at the end of December 2025 had assets under
management of R216 billion in 219 regulated funds. Roughly 49% were held in Retail Hedge funds
and the balance (51%) in Qualified Investor Hedge funds.

Regulations governing hedge funds
In SA, hedge funds were an unofficial part of the collective investments landscape for many
years. In 2015, however, hedge funds were pulled under the umbrella of the Collective Investment
Schemes Control Act (CISCA). Before 2015 hedge fund managers were licensed and regulated by
the FSCA in terms of FAIS but not under CISCA. They contractually agreed the terms of investment
with investors. Under the new rules many conditions of investment are regulated and cannot be
varied by the manager. These include repurchase obligations, valuation and pricing requirements,
and disclosure and reporting requirements.
Hedge funds were officially classified as collective investment schemes from 1 April 2015
(Government Notice 141 of 2015). Established hedge funds that accepted money from the public
had until the end of September 2015 to lodge applications for registration with the FSCA. An
amendment to existing regulations has created a new investment scheme category for hedge funds.
This means that the rules governing hedge funds are not always the same as those which apply to
unit trusts.

144 Profile’s Unit Trusts & Collective Investments March 2026