Page 154 - Profile's Unit Trusts & Collective Investments - March 2026

Chapter 8 Classification of CISs

R investors may swap an ETF for a physical basket of shares, which can then be traded in the
market to take advantage of the mispricing;
R investors may arbitrage between the market (spot) price of the ETF and the futures contract on
the index. (SAFEX – the futures market and SETS – the spot equities market, operate on the
same JSE trading platform, which facilitates this type of trade.)
In addition, official market makers are appointed by the ETF managers to provide market liquidity
and to ensure that the ETFs trade at or close to fair value (NAV).
From a cost point of view, ETFs and unit trust funds compete directly with each other, and this
is reflected in their competitive pricing structures. As with most CIS products, the final cost to the
investor depends on various factors. In general, for the retail investor, ETFs bought via a stockbroker
are cheaper than buying unit trust index funds directly from a CIS manager, but a unit trust index
fund bought through a LISP offering zero or low initial charges may be cheaper than brokerage fees
on purchase of an ETF. Annual service fees also differ depending on the purchase route (see fund
fact sheets).
Some ETFs offer “investment plans” which allow retail investors to invest in a fund via a monthly
debit order.
These investment plans are typically outsourced and have an additional layer of costs specific
to the investment plan investor (ie, in addition to the fees charged by the fund). So, for example, an
annual fee of between 0.575% and 0.345% (based on a sliding scale) of the total amount invested
is charged by the Satrix investment plan. This fee would not be payable if the investment was made
via the JSE (through a stockbroker), but then stockbrokers do not offer the convenience of monthly
debit orders.
The first ETF-based retirement annuity (RA) launched in 2013. Like other LISP or wrapper
retirement products, these vehicles are managed in order to be compliant with Regulation 28 of
the Pensions Fund Act. Only ETFs are used as underlying investments, giving investors a low-cost
retirement funding option free of the contractual limitations and penalties often associated with life
assurance RA products. Investors in these products enjoy the comfort of knowing that the investment
will never drastically underperform the mix of underlying indices. Like Regulation 28-compliant
Multi Asset funds, the ETF-based RAs combine different asset classes and a mix of underlying
funds to achieve their investment objectives.

152 Profile’s Unit Trusts & Collective Investments March 2026