Page 81 - Profile's Unit Trusts and Collective Investments 2021 issue 2

The CIS Industry

How frequently the CIS manager will calculate selling and repurchase prices, what time of
day the calculations will be done (referred to as the valuation point)
How non-listed assets are to be valued for the purpose of determining market values at the
valuation point
How distributions are to be calculated and settled
The limits, terms and conditions under which scrip may be lent
The limits, terms and conditions under which a manager may, for the account of a portfolio,
borrow money
The charges that may be levied and the method of calculation of those charges
The manner in which the deed may be amended
Every deed must compel the CIS manager to repurchase all participatory interests offered to it.
As part of the deed, the CIS manager must define exactly how repurchases will work – by what
time a repurchase request must be received, and what valuation point applies to each repurchase
(based on the time stamp of the request). The deed is submitted to the Registrar for approval
before a fund is launched.
A supplemental deed contains changes or additions to the original deed. This could relate to
any aspects of the deed, but often arises when a management company launches a new fund or new
unit class. Rather than start from scratch, the manager lodges a supplemental deed that sets out
the requirements, in terms of the act, not already covered in the first deed or previous
supplemental deeds. For an existing fund, a supplemental deed is drawn up to change existing
terms or to add new provisions. Examples would include a change in the fee structure, the addition
of a performance fee, a change of benchmark, or even a change in the name of the management
company. A majority in value of investors must assent to any amendment in the deed and its
associated supplemental deeds.
Asset Managers

The asset manager (individual or team) of a collective investment scheme may be part of the
CIS manager or a separate asset management company appointed by the CIS manager to handle
the portfolio. Examples of asset management firms in South Africa include OMIGSA (Old Mutual
Investment Group), Investec Fund Managers, and Momentum Collective Investments.
From the investor’s point of view – assuming the investor is in no doubt about the soundness
of the fund – the asset manager is the key component, for it is the asset manager who will
determine the investment returns of the portfolio.
Asset managers often employ analysts to stay abreast of economic and political developments
which may affect investment opportunities, and of factors affecting particular industries and
business sectors. Armed with this information, asset managers try to select investment
opportunities which will deliver above-average returns.
There are many approaches to asset management, and not all fund managers aim to be
“experts” on the economy and business. The manager of a tracker fund, for example, uses
computer models to replicate an index. These are also called “passive” funds, because the asset
manager does not make active choices about asset allocation based on expert knowledge. Some
asset management companies use a “team” approach, where no one individual runs a fund; others
prefer the philosophy of definite responsibility, and give one portfolio manager overall authority to
make investment decisions.
Fund Mandates
While asset managers obviously seek to obtain the best returns for investors, they must also
operate within the fund mandate.
The mandate is a document prepared by the CIS manager describing the objectives and
investment parameters of a fund. This is lodged with ASISA, and must be signed by both the CIS
manager and the portfolio manager. It is regarded as a public document, and must be made
available to any investor by ASISA upon request.

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