Page 153 - Profile's Unit Trusts & Collective Investments - March 2026

Classification of CISs Chapter 8

Actively Managed Certificates
Actively Managed Certificates (AMCs), like exchange traded notes, are debt instruments listed
on a stock exchange that offer exposure to an underlying actively managed portfolio. AMCs
are not collective investment schemes or EFTs - they are more like structured products. The
issuer, typically a bank, offers nvestment contract or debt instrument typically issued by a bank that
offers an investment return based on the return of the portfolio to which the product is linked.
However, while ETNs give you exposure to a passively managed index or commodities, actively
managed certificates offer exposure to actively managed portfolios.
From a fund management point of view, most ETFs are very similar to other index funds: they
replicate the weighted constituents of an index in a physical portfolio, benefiting from market
movements, and collecting and paying dividends.
The new Actively Managed ETFs are similar to actively managed unit trust funds, but the managers
can choose whether to declare holdings quarterly or daily, but intraday net asset values must be
published at least three times a day.
A number of Actively Managed ETFs are those
focussed on providing income, while others are global Exchange Traded Funds
funds offering exposure to global markets in rands. An Exchange Traded Fund (ETF) is a
From the investor’s point of view, ETFs have fund which tracks an index but which
several features which differentiate them from can be traded on a securities exchange
unit trusts. like a share. This allows investors to buy ETFs through
R ETFs can be bought and sold through a stockbroker a stockbroker, although some ETFs can also issue
as they trade all day like any other share so units or shares directly. Relatively niche products
investors can take advantage of intraday market 25 years ago, ETFs are now a major – and booming
movements and the ETF prices are always visible – investment category. Recently passive funds in the
and transparent. Unit trusts effectively only trade US have dominated investor interest, soaking up the
once a day after the market closes. lion’s share of inflows.
R Unit trust investors buy and sell at the previous day’s
“closing price” (ie, the NAV unit price as calculated
by the fund). ETF investors trade at a market price Exchange Traded Notes
determined by supply and demand (although this
is usually very close to NAV). ETFs allow large Like an ETF, an Exchange Traded
investors to “cash out” or redeem an investment Note (ETN) is an Exchange Traded
by taking a basket of shares in proportion to the Product (ETP). From the investor’s
ETFs holdings. Unit trusts can only repurchase point of view, an ETN looks very much like an ETF:
units for cash. (This ability to “cash in” ETF units for it typically tracks an index, forex rate or commodity
underlying shares creates arbitrage opportunities price, and it can be traded on the stock exchange
which ensure that ETFs usually trade at NAV.) like a share. The key difference between ETFs and
ETNs is that with ETNs the underlying assets do not
R Settlement of ETFs in SA is via the JSE/STRATE belong to the investors. Technically, an ETN is not a
settlement and clearing systems, which takes three collective investment scheme but a debt instrument
business days. Unit trusts can usually be liquidated – a promise made by an underwriting bank to pay
in 24 to 48 hours, although the actual time varies to the holder of the ETN an amount equivalent to the
from one manager to another. movement in the reference index, rate or price, less
Both ETFs and unit trust index funds, as collective fees. ETNs are therefore subject to credit risk (ie, the
investment schemes, must publish NAV prices on a daily risk of default). A major advantage of ETNs is that they
basis. The JSE does allow ETFs to trade directly with offer retail investors access to otherwise inaccessible
clients for large orders. In this case, the transaction must asset categories (such as specific commodities and
be done at the NAV price, as per the CISCA rules. frontier markets). They also offer a low tracking error
Arbitrage ensures that ETFs trade very close to NAV. In (ie, the issuer undertakes to match the movement in
the event of a mispricing (ie, a discrepancy between the the underlying security, so that before the deduction
NAV of the ETF and the market price): of fees the tracking error is zero).

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