Page 31 - Profile's Unit Trusts and Collective Investments 2021 issue 2

History of Collective Investment Schemes

Chapter 1

History of Collective

NQF
Investment Schemes Relevant to
2413129: 1, 3, 4
243135: 3
History of Collective Investment Schemes
243148: 1
When the first South African unit trust was launched by Sage in 1965, it was 243153: 2, 3
marketed as an investment vehicle for the man in the street. Unit trusts were
designed to give ordinary people access to the JSE, until then seen as the preserve of the
very rich and those with specialist knowledge. For the average working man, the JSE was
a dangerous and mysterious place, a place of high finance where fortunes were made and
lost. Unit trusts offered professional management, low initial investment amounts,
diversification, and access to expensive blue-chip shares. Today, collective investments
themselves require specialist knowledge, as unit holders must make choices between
general funds, theme funds, funds of funds, hedge funds, bond funds, multi-manager
funds, passive funds, and many more.

The Establishment of Unit Trusts
The first formal collective investment schemes in South Africa, as elsewhere in the world, were
equity unit trusts.
The share market, even today, is seen by many non-financial people as an arcane and
mysterious club, and this was even more true in the middle of the last century.
Many people regarded the stock market as a very risky investment environment, where
fortunes could be made or lost very quickly. While stockbroking firms offered individual portfolio
management services, they often required a minimum lump sum investment amount far in excess
of what the average working person could afford. Managing one’s own account required an
understanding of financial terminology, and most importantly, an understanding of what makes
share prices rise and fall, a question that still befuddles many non-financial people.
For all of these reasons, participation of ordinary working people in the share market was
uncommon.
At the same time, there was certainly a public perception that, given the correct circumstances,
knowledge and management, the share market was a place where wealth could be accumulated.
In this mix of trepidation and aspiration, Sage, the first South African company to establish unit
trusts, saw a business opportunity.
The first unit trust was launched on 14 June 1965 by Sage in the middle of an eight year stock
market bull run that started in 1961. Together with his colleagues, Sage founder Louis Shill
worked closely with the financial authorities to create the legislative platform which would allow
the establishment of a unit trust industry. Original shareholders in the first Sage fund were Shill,
Donald Gordon, Liberty, Nedbank, and several personal friends of Shill and Gordon. Initial assets
of the fund were R600 000.

Stocks and Shares
What’s the difference between stocks and shares?
The term “share” generally refers to a single unit (as in “one ordinary share”), whereas
“stock” refers to a group of shares (as in, “my stock in ABC Ltd. has risen handsomely”). In practice
the terms are used interchangeably.
“Stock market” and “share market” refer to the same place. In the context of share investments, a
company’s “stock” means the total number of shares issued by the company.

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