Getting to grips with new classifications

2012-09-22 13:03

Main category: Equity

These funds will invest at least 80% of the fund into listed shares.
Sub categories

» General: Fund can invest in any share listed on the JSE.
» Large Cap: Only invests in shares with a market value equal or greater than the largest 40 shares listed on the JSE. The benchmark is the Top40.
» Mid and Small Cap: The benchmark is the Mid Cap index: Funds invest in any shares with a market value smaller than the Top40.
» Resources: Fund only invests in resource shares.

Benchmark resources index
» Financial: Fund invests only in shares listed in the financial sector. Benchmark financial index.
» Industrial: Fund only invests in shares listed in the industrial sector. Benchmark industrial index.
» Unclassified: A fund that does not fit into any of the above. An investor would need to read the fund’s mandate.

Main category: Interest bearing

These funds will invest only in interest-bearing financial instruments. Used to be called Fixed Interest.

Subcategories
» Money Market: Fund would have a constant unit price and invests in short-dated financial instruments.
» Short-term: modified duration up to two years: Fund typically has an average weighted duration of two years and can have capital gains and losses where a 1% move in the underlying interest rate equates to a 2% move in the underlying capital value. Previously called an Income Fund.
» Variable term: Fund invests in long-dated financial instruments such as bonds. Previously called a Bond Fund.

Main category: Multi asset, Real Estate

This fund can invest in a range of asset classes, such as equities, cash, bonds and property.

Subcategory
» Income: Fund can hold up to 10% in equities.
» Low equity: Fund can hold up to 40% in equities.
» Medium equity: Fund can hold up to 60% in equities.
» High equity: Fund can hold up to 75% in equities.
» Flexible: Fund has no maximum or minimum limits on how much equity it can hold.

Real Estate
General: Fund must have up to 80% of its assets in property.

Funds appropriate for retirement

Many investors use unit trusts to invest their retirement funds. However, under Regulation 28 of the Pension Funds Act, only certain unit trusts qualified as they had to meet certain investment rules.

Previously, the funds that fell under the Asset Allocation-Prudential Equity categories qualified.

That category has been removed and funds that qualify will be specifically denoted as meeting that requirement. This means that Interest-Bearing funds will also be included.

Nevertheless, it is expected that all funds under the Multiasset category, except for Flexible Funds, will meet these requirements.

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