Page 162 - Profile's Unit Trusts and Collective Investments 2021 issue 2

CHAPTER 8

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 0.61% and 0.36% (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.
A new innovation in the ETF market is the introduction of the ETF-based RA (retirement
annuity), launched in 2013. Like other LISP or wrapper retirement products, these vehicles are
managed in order to be compliant with the Pensions Fund Act (Reg 28). 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 Reg-28 compliant multi-asset funds, the
ETF-based RAs combine different asset classes and a mix of underlying funds to achieve their
investment objectives. The asset allocation of a typical ETF-based RA consists of 50%-55% in
domestic equities, 15%-20% in global equities, 5%-10% in domestic property, 15%-20% in local
bonds, 5%-10% in global bonds, and 5%-10% in the local money market.

160 Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts