Different unit trusts explained
Claire van Wyk
Here’s how slideshare.net defines the many types of unit trusts you’ll come across.
#1: Balanced funds
A balanced unit trust fund has a portfolio comprising a mix of equities, fixed income securities and cash. They’re perfect for investors who want to reduce the risk of investing in the major asset classes.
#2: Equity funds
These are the most common unit trusts out there. They’re made up of a host of listed companies (or equities) based on certain criteria as outlined by the unit trust’s specific mandate. For example, you get equity fund unit trusts that only invest in a specific sector (e.g. constructions shares) or a specific type of share (e.g. large-caps).
#3: Fixed-income funds
Fixed-income funds invest mainly in fixed-income products like bonds and money market instruments. The objective is for this type of unit trust to provide you with a regular source of income. It’s a great vehicle for retirees who need extra cash.
#4: Index funds
These unit trusts invest in companies that closely match (or track) a particular index, e.g. the industrial sector.
#5: International equity funds
International equity fund unit trusts only differ from other equity unit trusts in that they invest in offshore companies, not local ones.
#6: Money market funds
“Money market funds invest in liquid, low-risk money market instruments that are in effect shortterm deposits (loans) to banks and other-low risk-financial institutions, and in short-term government securities,” explains eunittrust.com.
#7: Real estate investment trusts (Reits)
Fairly new to the SA unit trusts market, a Reit is a listed company or property unit trust that invests in immovable property, receives income from rental and pays it through to its investors. It does all the hard work as it buys, manages and operates the property.
#8: Shariah funds:
Finally, there are ethical unit trusts – or Shariah funds – that invest into Shariah-compliant investments. This excludes companies involved in activities, products or services related to gambling, alcoholic beverages, etc.
Claire van Wyk is a Discovery Certified financial adviser
Sygnia Asset Management’s decision to close all its fund-of-hedgefund products raised questions. Are hedge funds too expensive; are they delivering on their promises and do their returns justify their fees?
Long-short equity hedge fund managers point to their long-term track records as proof that they can deliver superior risk adjusted returns; detractors argue the same funds’ three-year performance has been underwhelming.
Further, hedge fund strategies are more complex than those used by traditional unit trusts. It’s not always easy to appreciate how they achieve their aims.
What should hedge funds add?
Global asset manager Schroders recently surveyed global institutional investors about why they invest in hedge funds.
The overriding motivation “is a requirement for uncorrelated returns and portfolio diversification,” writes Johanna Kyrklund.
Currently, both global equities and global bonds look expensive.
Fixed-income funds invest mainly in fixed-income products like bonds and money market instruments.