The Association for Savings and Investment South Africa (ASISA) reported that the local collective investment schemes (CIS) industry had R4.6 trillion in assets under management as of June 2026. The industry offered 1,945 local portfolios, providing investors with a wide range of options. However, the sheer size of the industry and the number of portfolios do not necessarily indicate which fund is suitable for an individual investor's savings plan.
Collective investments pool money from many investors into professionally managed portfolios, offering access to diversified investments without requiring individual investors to assemble their own holdings. A unit trust gives each investor a proportional interest in the portfolio, with its value linked to the underlying assets. However, the investment structure alone does not determine the level of risk; instead, it depends on the portfolio's mandate.
Different types of collective investments serve distinct purposes. For example, equity funds invest in shares, while money market funds hold short-term instruments. Their potential returns, losses, and holding periods differ. Multi-asset portfolios combine different investments in one fund, aiming to moderate market fluctuations through diversification. According to Sunette Mulder, ASISA's chief of staff, South African multi-asset portfolios are "firm investor favourites".
When choosing a collective investment, it is essential to consider the purpose of the money. For money that may be needed soon, fluctuations in value can create an immediate problem. Money market funds offer relatively stable values and access to short-term interest-bearing investments, making them suitable for near-term expenses. However, stability is not a capital guarantee, and investors must consider inflation and costs.
Income funds, which hold bonds and other debt instruments, require closer inspection. Seeking a higher yield can introduce additional risks, and an income fund should not be treated as interchangeable with a money market fund. Investors must understand the holdings and risks associated with each fund. The practical distinction lies between money that must be available for a near-term expense and money that has time to withstand market fluctuations.
Once the investment's purpose is clear, investors can assess how a manager proposes to achieve it. Active managers select investments in pursuit of the fund's objective, while index funds follow rules designed to track a specified index. The choice of index matters, and investors still bear the risks of the market being tracked. Comparisons should reflect similar objectives and risks.
Understanding the full cost of a collective investment is crucial. The annual management fee is only part of the bill, and investors must consider the total expense ratio, which expresses operating expenses as an annual percentage of average assets. Costs deducted within the fund reduce returns, and platform or adviser charges may sit outside these measures. ASISA's Effective Annual Cost measure provides a broader breakdown of charges.
Key points
- The collective investment schemes industry in South Africa manages R4.6 trillion in assets.
- Investors must understand the purpose, risks, and costs associated with collective investments.
- Choosing a regulated investment is only part of the decision; investors must also consider whether the holdings suit the purpose of the money.
