‘Normal’ unit trusts
, or Collective Investment Schemes (CIS), are the most basic level of unit trust fund you’ll come across, the team of experts at The South African Investor
They are highly regulated under the Collective Investment Schemes Control Act of 2002. So buying into these comes with strict consumer protection.
When you buy these types of unit trusts, you buy units at the ruling price of the day. The ruling price is determined by using a historic pricing method or a future pricing method.
Historic pricing is when the prices are set at the end of the day, then the following day all transactions are at this price.
Futures pricing is when the fund manager calculates the value of the fund at the day’s close and that value applies to that day’s transactions.
If you want to find out the price for the units, they’re available online and in some newspapers. But remember, this is the unit price and doesn’t include any fees.
The types of normal unit trusts available
You can choose between unit trusts that invest in:
Multiple asset types (a mix of the above).
Portfolio managers will manage the unit trust funds in two ways: Passively or actively.
Passive funds track an index whereas active funds seek to outperform the chosen index.
What fees you can expect to pay
You can expect upfront fees around the 5% mark and annual of fees around 1% (both before VAT) of the monthly market value.
The fund manager may also charge a performance fee if the unit trust outperforms the chosen benchmark.
The fund manager must disclose all fees when you buy the unit trust, by law.
So there you have it, how a normal unit trust works.