Page 44 - Profile's Unit Trusts and Collective Investments 2021 issue 2

CHAPTER 2

Chart 2.4
REGISTRAR

TRUSTEE/
CUSTODIAN

PORTFOLIO
PORTFOLIO
PORTFOLIO
DEED (Fund/Assets)und/Assets)und/Assets)
(F (F
MANAGER
(Management
Company)
P
PARTICIPATORYARTICIPATORY
INTERESTS
INTERESTS
(Units)
(Units)

INVESTORSNVESTORS
I INVESTORS

Chart 2.4 shows the structure of a collective investment scheme, which could be a unit trust or other CIS.
Every CIS is governed by a deed, which falls under the authority of the Registrar at the
Financial Sector Conduct Authority (FSCA). The Registrar has the authority to inspect the work of
the trustee and the manager.
Each CIS is obliged to appoint a trustee or custodian, and one of the functions of the trustee is
to ensure that the manager operates the CIS in accordance with the deed. Another important
function of the trustee is to act as custodian of all cash and securities in the portfolio. Underlying
assets do not in any sense belong to the manager or management company, but are held on behalf
of investors by the trustee. This provides important protection for investors.
The manager (still commonly referred to as the management company, although strictly speaking
this term is outdated) is responsible for all aspects of the management of the fund, including
marketing, creating and selling units (or “participatory interests”), repurchasing units, keeping
records, and making investment decisions. Some of these functions may be outsourced.
Types of Collective Investment Schemes
Collective investment schemes can be classified according to the type of structure or the types
of underlying assets.
In terms of structure, most CISs in South Africa are unit trusts, meaning that the portfolio is
held in trust for investors by a trustee. In terms of the Collective Investment Schemes Control Act
(CISCA), a CIS can also be set up as a company (in which case the participatory interest is a
“share” rather than a “unit”). Types of collective investment schemes include (but are not limited
to) unit trusts, hedge funds, open-ended investment schemes (OICs), participatory bonds,
declared collective investment schemes, and collective investment schemes in property.
Offshore investment schemes are dealt with specifically under CISCA. In terms of the Act,
“foreign” CISs which wish to solicit business in South Africa must apply to the Registrar to be
approved and registered. They must prove their credentials (ie, their license to operate in another

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