Page 149 - Profile's Unit Trusts and Collective Investments 2021 issue 2

Classification of CISs

Chart 8.1 Revised Reg 28 Multi Asset Funds
Multi Asset funds (previously known
Asset Overall Sub- CISCA
Category Limit Limits Limit
as Asset Allocation funds) are funds
75%
Equities
Market cap greater than R20bn 15% 10% 1 which invest in a broad range of assets,
Market cap between R2bn and R20bn 10% 10% 1 including shares, bonds, money market
Market cap less than R2bn 5% 5% 1 instruments and property equities.
Unlisted equities (subject to strict valuation requirements) 15% 10% 2 The name of the category reflects the
fact that portfolio managers of these
Foreign exposure including inward listed shares 25% 25%
funds have more freedom than other
Investment in a suitably regulated vehicle in Africa 5% 5%
asset managers regarding what assets to
100%
Cash invest in. A manager of a general equity
Any single money market instrument issued by a South 25% note 3
African bank fund, for example, must have 80% of his
portfolio in shares at all times, whereas a
100%
Debt
On-balance sheet bank-issued corporate and public debt 75% note 3 manager of an multi asset fund could
have 70% in shares this year, and only
25%
Property
Market cap greater than R10bn 15% note 4 30% in shares next year (subject to the
constraints of his mandate).
Market cap between R3bn and R10bn 10% note 4
Market cap less than R3bn 5% note 4 At one time, the then Asset
5 Allocation sector consisted of just two
Commodities 10%
sub-sectors: Flexible funds and
Commodities other than gold 5% note 5
Prudential funds (ie, Reg 28 compliant
Gold 10% note 5
funds). For South African funds, a
5
Other Assets 15% decision was taken in 2003, however, to
Hedge Funds of Funds and Private Equity Funds of Funds 5% note 5
(per fund) break the Prudential sector into a
Limit per individual fund (ie, not a FoF) 2.50% note 5 number of narrower sectors in order to
Other assets not referred to in the amendment 2.50% note 5 group together the significantly different
5 95% equity exposures across the category:
Housing Loans
Loans granted to members directly by the fund 5% note 5 Prudential Low Equity, Prudential High
1 Greater of percentage or 120% of free float index weighting but no more than Equity and Prudential Medium Equity.
20% of fund (or 35% for specialist funds) A Prudential Variable Equity sector was
2
Max 5% in any one unlisted entity
3 See FSB notice 90 of 2014 (which replaced notice 80 of 2012) added in 2008.
4 The 2013 ASISA revision of the
Limits as per other equities for listed property shares
5
Collective investment schemes cannot invest directly in these categories classification standard adopted the
principle that Reg 28 compliant funds
should be “flagged” as such rather than placed in separate categories. The former prudential
categories were in a sense misleading as certain funds in other categories (such as money market
funds and bond funds) are automatically Reg 28 compliant. Under the new classification system,
compliance with Regulation 28 of the Pensions Funds Act will not be a factor in categorisation –
instead, Reg 28 compliant funds will be identified by an additional “flag” or label. On Profile’s
FundsData website, for example, a yellow pennant next to a fund name indicates a Reg 28
compliant fund. In addition, a complete register of all Reg 28 compliant funds is available under
the Lists menu item.
The South African Multi Asset group now consists of the following sectors:
Multi Asset – Flexible funds
Multi Asset – High Equity funds
Multi Asset – Medium Equity funds
Multi Asset – Low Equity funds
Multi Asset – Income funds
The equity exposure bias in the sector names – a feature preserved from the old prudential
categories – is designed to reflect different levels of risk. Equities are generally the most volatile
asset class and equity exposure is therefore the predominant source of risk in a multi asset
portfolio. Although not an absolute indicator of the risk associated with any one category, it does
group the funds more meaningfully than if they were in one sector.
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