Page 29 - Profile's Unit Trusts & Collective Investments - March 2026

History of collective investment schemes Chapter 1

The bull run that effectively started in December 1987 (after the short, sharp crash of the same
year) was truly spectacular. The Dow Jones Industrial Average (DJIA) rose some 550% from 1988
to 1999. In SA the JSE’s All Share index (Alsi) rose 450% from February 1988 to April 1998, before
declining sharply (nearly 44%) in six months. This fall was followed by another quick recovery
which, apart from a major “correction” in 2002/3 (the DJIA and Alsi fell 35% and 37% respectively),
continued until late 2007. In the US, markets peaked in October 2007; in SA the JSE enjoyed a final
burst which took it to record levels in May 2008 – 20 times what it had been in February 1988.
As with the crash of 1987, the market declines in 1998 and 2002/3 had a relatively muted impact
on the unit trust industry. In 2002, total industry assets still rose 3% in spite of an 11% fall in equity
prices over the calendar year – although in the decade from 1992 to 2001 industry assets grew by
32% per year, on average. From 2003 to 2007 industry assets again grew at almost 30% per annum.
In spite of 2008’s 26% decline in the JSE’s Alsi and global fears of an economic meltdown
comparable to the crash of 1929 (which led to the Great Depression of the 1930s), industry assets
still managed to show 1% growth in 2008, testimony to the newfound resilience of the unit trust
industry and the hard-earned wisdom of investors.
As in 1987, many seasoned investors who had been in the market for decades had confidence that
markets, given time, would recover, and some investors saw the decline in equities as an opportunity
to get into the market at favourable levels.
In 2020 global markets took another hit with the Covid pandemic losing more than 30% in weeks.
But despite the severity of the pandemic, the bear market was short-lived and within a few more
weeks the market was in recovery. The war in Ukraine, inflation and interest rate fears in 2022 set off
another fall in markets – around 17% globally and 25% in the US. This bear market lasted about 10
months before the recovery began.
Both of these events drove investors in the local unit trust industry away from niche equity sectors
toward funds with broader investment mandates, particularly multi-asset funds.
Global diversification has also increased with growing assets under management in both rand-
denomated and foreign-currency offshore funds.
The number of rand-denominated collective investment schemes has steadily increased over the
years – at the end of December 2025, according to ASISA – there were 1 936 domestic funds in SA,
of which approximately 13% were institutional-only funds (ie, funds with no retail classes, although
many of these are available indirectly in the retail market via LISPs). In addition, 791 foreign currency
denominated funds registered with the FSCA were on sale in SA at the end of December 2025.

The impact of technology
As in most areas of the modern world, technology has had a significant impact on the evolution of
collective investment schemes (CISs).
The explosion of products seen in the 1990s was partly due to the development of sophisticated
computer systems which made the administration of CISs relatively easy. Most aspects of the
administration of a unit trust depend on computer systems, from calculating daily NAV prices to
managing asset allocation, from administering repurchases to allocation of interest and dividends.
As computer systems became more user-friendly and more widely available, the systems
requirements for setting up and managing unit trusts became less of a barrier to entry, allowing new,
smaller companies to launch unit trusts, and allowing the larger institutions to manage multiple unit
trust offerings with comparative ease.
The impact of technology was not only felt in the “back office”, however. While administration of
unit trusts was getting easier, technology was also creating new opportunities for fund managers.
Modern, sophisticated computer systems give fund managers far more control over portfolios
than their counterparts of four decades ago. Tracker funds, ETFs and funds that are based on
quantitative analysis are good examples of products that would not exist were it not for the advances
in data processing and automation of computer systems. These popular products rely on the fund
manager’s ability to construct a portfolio which mimics, as far as possible, the composition of a major
index (such as the JSE’s Top 40 index, for example). Calculating the correct proportions of each

Profile’s Unit Trusts & Collective Investments March 2026 27