Page 152 - Profile's Unit Trusts & Collective Investments - March 2026

Chapter 8 Classification of CISs

One of the possible disadvantages of using a feeder fund to get offshore exposure is that
capital gains tax (CGT) might be higher. This is because of the way CGT is calculated for offshore
investments. With a feeder fund, CGT is paid on the gain in rands (ie, effectively including currency
gains). With an offshore investment, however, CGT is paid on the foreign currency gain translated
into rands at the time of sale. Given the tendency of the rand to weaken against major currencies
over the long term, this can mean a substantial CGT difference. For example, an investment of
USD1 000 at R14/USD redeemed two years later with a 20% capital gain with the exchange rate
having risen to R18/USD would mean, at the maximum marginal tax rate for individuals, R1 368 in
CGT via the feeder fund, but only R648 in CGT via an offshore investment (ie, money transferred
overseas). Note that this would turn into a disadvantage if the rand strengthened over the investment
period.

Multi Manager funds
The Multi Manager fund is another fund “concept” which transcends the ASISA sectors. Multi
management is about the way in which a fund is managed rather than the type of assets in which it
invests (the latter being the basis of the ASISA classification).
In the early days of unit trusts each fund had its own fund manager. This “single fund manager”
concept is still the most common management structure today.
Obviously the single fund manager does not work in isolation, but has a support team at the
management company, which may include fundamental, technical and quantitative analysts.
Some management companies use a team approach to manage their funds. In this case no single
fund manager is entirely responsible for one fund. Instead, decisions about asset allocation are
made by an investment committee. Either way, both individual fund managers and investment
committees tend to have a particular investment “style”.
The multi manager concept grows out of the belief that the investment styles of particular managers
or investment committees are not equally effective under all market conditions. The particular style
of one investment house may produce relatively good performances in a bear market, while the style
of another may produce above average returns in a bull market. Or one style may excel when bond
markets are running, and another when offshore markets are doing well.
The Multi Manager fund tries to capitalise on these different strengths by outsourcing the
management of the fund to two or more complementary managers or investment houses.
Multi Managed funds typically have a greater level of diversification compared to single manager
funds and therefore lower active risk (ie, non-market risk) than single manager funds.
There are two main types of Multi Manager funds: Fund of Funds and “manager of managers”
type funds. Note that not all Fund of Funds are explicitly Multi Manager funds in the true sense: to
qualify as a Multi Managed fund the manager must be choosing underlying funds specifically on
fund manager and style criteria rather than asset allocation criteria.
Exchange Traded Funds (ETFs)
Exchanged Traded Funds (ETFs) are funds which are listed on a stock exchange and can be
traded like a share.
Initially ETFs were tracker or index funds offered at low cost.
Recently, however, actively managed ETFs have been launched that are managed by fund
managers with the expertise to pick securities.
The majority (but not all) ETFs listed on the JSE are also registered as collective investment
schemes, in effect creating two markets for these funds.
SA’s first ETF, the Satrix 40, was launched in November 2000. It tracks the FTSE/JSETop 40
index. Since the launch of the Satrix 40 the JSE’s index-tracking ETF sector has grown to 131 funds
by February 2026, including sector-specific ETFs, funds that track overseas and global indices,
and even a fund that tracks the rand. The Actively Managed ETF sector had grown to 30 funds by
January 2026.

150 Profile’s Unit Trusts & Collective Investments March 2026