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Unit Trusts

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WHAT IS A UNIT TRUST?

Unit Trust Funds or collective investment schemes give investors tax-efficient access to a large basket of shares and expertise that would not be available in an individual portfolio.

Most unit trusts are actively managed, meaning that the underlying holdings are carefully researched and evaluated by fund managers before being included in a portfolio. However, there are passively managed unit trusts which are designed to track an index. These unit trusts funds tend to have lower annual fees than actively managed funds.

It should be noted that some passively managed unit trusts have more compelling fee structures than some Exchange Traded Funds.

Unit Trusts are similar to ETFs because they are both collective investment schemes that allow you to invest in a group or basket of shares rather than investing in a single share. Like ETFs, Unit Trusts are open-ended. This means that the unit trust management company can issue and redeem shares at any time. In practice, it means that units in the fund are bought and sold by the company and new investors, not between investors. In contrast to ETFs, most Unit Trusts are actively managed collective investment schemes. This means that the shares, which make up the Unit Trust, are selected on merit by a fund manager who will buy and sell the underlying assets regularly to reflect his/her view on the future direction of the market. Most Unit Trusts are in effect share portfolios, with each investor owning a fraction of that portfolio. Unit Trusts can however also contain other assets - such as property unit trusts or government bonds.

Unit Trusts are priced daily based on the value of the underlying assets. This means your asset value and investment holdings in the collective investment scheme will always be valued at prevailing market prices and investments can be redeemed at any time.

HOW DO I INVEST IN A UNIT TRUST?

If you are interested in Unit Trust investing, you can complete the simple online registration process.

STEP ONE: Register online for Unit Trust account and PSG Online web profile.
STEP TWO: Provide us with your FICA details if you are new to PSG Online. PSG Online will open your Unit Trust account within 72 hours of receipt of your FICA documents.
STEP THREE: Login to your collective investment scheme account. You will use the same username and password chosen when you registered for your web profile in Step One.
STEP FOUR: Purchase your Unit Trusts collective investment scheme in your Unit trust account straight from your portfolio.

WHAT ARE THE ADVANTAGES OF INVESTING IN UNIT TRUSTS?

Diversification - Unit Trusts represent a basket of shares, commodities or properties and provide broad exposure rather than the focused exposure of one or two shares or instruments.
Liquidity - Unit Trusts can be bought and sold daily, which means your investment is always available should you need it.
Accessibility - Unit Trusts can be traded using your PSG Online Unit Trust account as a once-off transaction or via monthly debit orders.
Flexibility - PSG Online offers you access to a wide range of Unit Trusts from a number of different providers, including Allan Gray, Coronation, Investec and PSG Fund Management. We do not restrict you to funds from one management company.
Tax Efficient - Unit Trust managers may trade within the unit trust portfolio without becoming liable for any income tax on profits. Long-term investors can therefore benefit from active and frequent trades on the part of the fund manager, while only becoming liable for Capital Gains Tax (CGT) when the unit trust is sold.
Long Term Savings - Unit Trusts work very well within a retirement portfolio - such as a Retirement Annuity (RA), Pension- or Provident Fund. That allows you all the tax benefits of a retirement fund with the added advantage of choosing your underlying fund managers.
Income - Because the underlying assets earn dividends or interest, you can receive an income from your Unit Trust portfolio without reducing your total investment.

Collective investment schemes like Unit Trusts can serve as a cornerstone of your long-term strategy for creating wealth. They give you the opportunity to make smaller monthly investments while still getting exposure to the financial markets.

DISADVANTAGES OF INVESTING IN UNIT TRUSTS

Unit trusts are designed for the use of investors who wish to have access to the markets but who do not have the time or expertise to invest directly themselves. During times of market volatility the long term performance of unit trusts can be negatively affected for those who remain in the market, as many fund managers become forced sellers owing to the panic selling of investors. Fund managers may have to sell companies previously bought at favourable prices.
Fees charged by unit trust management companies are unregulated. Unit trusts management companies charge an initial fee, an annual fee and sometimes a performance fee. Other possible costs include platform fees and financial advisor fees. Higher than necessary management fees should be avoided in all investing environments, but should be carefully scrutinised in low return market conditions.
Investors should be mindful of the combined effect of all fees, relative to the performance of the unit trusts that you have selected

Invest in Unit Trusts, invest in your future, Register now to start.

WHAT ARE THE COSTS?

Note: You are able to either make a once-off purchase into a Unit Trust or a monthly debit order. If you wish to make a once-off purchase you will need to deposit funds into your collective investment scheme account prior to making the purchase. Debit orders are collected monthly from your bank account.

The costs associated with Unit Trust investing vary on the type of collective investment scheme you choose. Certain collective investment schemes also charge performance fees when they outperform an established benchmark.

Unit trust debit order investments are available from as little as R500 per month. Register for your Unit Trust portfolio today.

WHO PROVIDES THE Unit Trusts?

PSG Online provides the investment platform through which you can invest in a range of unit trust funds provided by different companies. These funds have been carefully scrutinised to ensure that you receive the best possible fund manager to match your investment mandate requirement.

The role of Unit Trusts in your overall strategy is dependent on your overall investment strategy. If you are uncertain as to which funds to choose or how much to invest, allow us to help you formalise your wealth strategy through a process of financial planning to create an investor profile which suits your goals. Otherwise contact a PSG Konsult financial advisor if you would like someone to invest in Unit Trusts on your behalf.

Can the Unit Trust Fund manager invest in anything?

Even though there are a wide variety of different unit trust options, the fund manager can only invest according to the specific mandate of the unit trust fund. There are many categories of unit trusts available; some are mandated to invest in different geographic regions, some are limited to particular asset types or combinations of asset types while others are mandated to be invested in a range of assets considered appropriate for a retirement portfolio. Some unit trusts have been designed to invest according to social or religious investing requirements.

General equity unit trusts can invest in a broad range of stocks, while specialist equity funds invest in a much smaller universe of shares that is precisely defined.
Property unit trusts invest at least 50 percent of their assets in listed property.
Fixed interest funds are those that invest in interest-bearing financial assets and include bond, income and money market funds.
Funds of funds invest in the units of other unit trust funds. They offer an investor a broader, carefully selected exposure to a diversified range of unit trusts. This approach spreads the risk among many fund managers instead of entrusting just one with all the investment decisions.