What is a Unit Trust?
Quite simply, a unit trust is an investment product that gives you a return on your savings. More technically, it refers to an investment portfolio that is managed as a Collective Investment Scheme and divided into equal parts or ‘units’. As a unit trust investor you’d be buying units of the portfolio, with each unit representing a proportionate share of all the assets underlying the portfolio. The unit trust price reflects the current market value of the underlying assets, divided by the number of units in issue.
Who should consider a Unit Trust investment?
You should consider a Unit Trust if
- you want to invest discretionary (non-retirement) savings in a diversified and professionally-managed portfolio
- you want to reach a particular (non-retirement) savings goal
- you have a lump sum you wish to invest in order to provide you with a regular income
Those individual savers wishing to invest towards their retirement should first consider a retirement fund for individuals (a retirement annuity or preservation fund), in light of the attached tax advantages.
What should you consider in choosing a Unit Trust?
You should consider four primary factors in selecting your Unit Trust: diversification, investment style, asset allocation and fees.
Diversification ensures that your portfolio is exposed to different asset classes (shares, bonds and cash), securities, geographies and currencies. This enables the positive performance of some investments to neutralize the negative performance of others. Shares and Property (which are considered growth investments) offer high expected long-term returns, but are also liable to fluctuations over time, especially in the short term. Bonds and Cash (which are considered defensive investments) provide lower long-term returns, but also far more resilient to market fluctuations and generally offer more stable results.
Provided that the movement of the portfolio’s assets is not perfectly correlated, this should yield a higher-risk adjusted return than any individual investment within the portfolio.
With 10X, your savings are invested in:
- Shares in well-established companies
- Interest-earning investments known as bonds
When we structure the portfolio across these four asset classes, we consider two key aspects:
- Weightings: how much of each to have in the fund
- Investment Style: the method used to purchase the investments in the four asset classes
The 10X Prime High Equity Fund is managed on the basis of strategic asset allocation. Each asset component aims to replicate the returns of the underlying benchmarks below.
|SA Equity||10X Top 60 SA Share Index||Top 60 shares on the JSE with a 6% cap per share on re-weighting|
|SA Property||10X SA Property Index||Top 14 property shares on the JSE|
|SA Bonds||South African Government Bonds Index (GOVI)||SA Government Bonds: nominal|
|Barclays/ABSA South African Government Inflation-Linked Bond Index||Inflation Linked SA Government Bonds|
|SA Cash||AF Short-Term Fixed Interest Index||Interest rate on 3-month SA cash deposits|
|International Equity||Global All Cap Index||Top 7000+ global stocks|
|Emerging Markets Index||Top 900+ emerging market stocks|
|International Currency||US Dollar/Rand exchange rate||US Dollar/Rand exchange rate|
Rather than attempt to time markets, the 10X Prime High Equity Fund will have a strategic asset mix, with disciplined re-balancing every six months. Rebalancing locks in gains on outperforming asset classes, and buying more of the lower-priced ones.
You should match your asset allocation (in essence, the extent of your exposure to growth assets such as shares) to your investment time horizon. The four main asset classes each has its own advantages and disadvantages. Shares and Property (considered growth investments) potentially offer high expected long-term returns, but are also liable to fluctuations over time, especially in the shorter term.
Bonds and Cash (considered defensive investments) provide lower long-term returns, but are far more resilient to market fluctuations and generally offer more stable results. If your time horizon is longer than 5 years, a portfolio with more growth assets may suit you, but for shorter periods, you would want to reduce your holdings in growth assets.
The 10X Prime High Equity Fund has the following allocation:
Compare the potential outcome of your investments with our Unit Trust calculator.
Collective Investment Schemes are generally medium to long term investments. The value of participatory interests may go down as well as up. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Past performance is not necessarily an indication of future performance. CIS’s are traded at ruling prices and can engage in borrowing and scrip lending. Different classes of units apply to these portfolios and are subject to different fees and charges. A schedule of fees and charges and maximum commissions is available on request from the manager. The manager has a right to close portfolios to new investors in order to manage them more efficiently in accordance with their mandates. Forward pricing is used. The manager may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. Actual investment performance will differ based on the initial fees applicable, the actual investment date and the date of reinvestments of income. Dealing prices are calculated on a net asset value and auditor’s fees, bank charges and trustee fees are levied against the portfolios. Risk profile of the fund ranges from low risk to high risk with a low risk potentially associated with lower rewards and a high risk with potentially higher rewards. Foreign securities may be included in the portfolio from time to time and as such may result in the following: (a) potential constraints on liquidity and the repatriation of funds; (b) macroeconomic risks; (c) political risks; (d) foreign exchange risks; (e) tax risks; (f) settlement risks; and (g) potential limitations on the availability of market information. One can also obtain additional information on Prime products on the Prime CIS website and all price related queries or information is readily available on request. The daily cut off time is 14:00 for trades and the valuation point is 17:00. Prices are published on Finswitch by 10:00 daily. Prime Collective Investment Schemes Management Company (RF) (Pty) Ltd is registered as a Collective Investment Scheme Manager in terms of Section 5 of the Collective Investment Schemes Control Act and is a member of ASISA. Transaction Costs are a necessary cost in administering the Financial Product and impacts Financial Product returns. It should not be considered in isolation as returns may be impacted by many other factors over time including market returns, the type of Financial Product, the investment decisions of the investment manager and the TER. The fund does not charge any performance fees. The manager retains full legal responsibility for the third-party-named portfolio.
The 10X Top 60 SA Share Index and 10X SA Property Index (the “indices”) is the property of 10X Investments (Pty) Ltd, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Index. The Indices are not sponsored by S&P Dow Jones Indices or its affiliates or its third party licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by 10X Investments (Pty) Ltd. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”), and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).