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Unit Trusts

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So most of us here are probably ETF fanboys because "justonelap", "tannie Nerina" and EasyEquities being so damn cheap.

 

I'll be honest, I own both ETFs and unit trusts although I've being neglecting the latter. So, the current trend seems to be people bashing them, saying they are too expensive blah blah blah and to a certain degree they are right. Well actually they are very right. Unit trusts have the benefit of you not being the "active manager" and hence probably a lot less stressful to invest in :P

 

Anyway, whom of you guys own unit trusts, which ones do you own and how have they performed for you?

 

Myself, I make use of Stanlib and I'm invested in they're Multi-Manager All Star Fund of Funds..erm.. fund. I prefer the multi managers - less risk of one guy making a mistake.

 

Had a look and I reckon I'll go talk to my financial advisor and see how I can restructure and avoid/fix some of the duplication I have between my ETFs and unit trusts. I reckon something like their Absolute Income or Aggressive Income fund is also a much better proposition for keeping and building up an emergency fund than say a 32-day notice account (with some more risk but also more growth).

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Hey Hamster, I own some unit trusts and ETFs. My RA is with Sygnia Skeleton Balanced 70 fund and my TFSA is in the Sygnia Worldwide Flexible fund. I also have a smart beta unit trust with Fairtree which combines 4 factors in one fund: Value, Momentum, Volatility and Quality. Its an index tracking passive fund, the active component lies in the selection between these 4 factors. Also have the Coreshares DIVTRX and LVLTRX in my Easy Equities TFSA account which I will transfer to my Sygnia TFSA. Currently the Sygnia funds and Fairtree Smart Beta fund does everything I need. I tried ETFs but it does not work for me. For one My Sygnia flexible fund can change the allocations to the different asset classes and international equities in an unconstrained manner. With ETFs I don't have this flexibility without triggering capital gains tax if I want for instance increase my offshore weighting. The same for the Smart beta fund. This is all done with low fees. For me personally I will pass on ETFs.

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I already have a unit trust investment in the Coronation Top 20 fund. Does it make any sense to also invest in the Satrix ETF Top 40 fund?

 

Or would this be considered essentially buying two of the same things, if I can put it that way?

 

Also, is this website relatively new since I have been looking for something like this for ages!

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that does makes sense, thanks @Hamster. I guess in that case I will just keep adding to the Top 20 ( http://www.coronation.com/za/personal/top-20).

 

I am not particularly fond of the management fees however I would not be able to maintain those returns nor invest the time to go about such an endevour myself. That is why I like the idea of a unit trust, picking the right one on the other hand.

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The woman from Sygnia write an article a while back explaining the fees if unit trusts vs. ETFs.

 

ETF managers are good at selling ETF as cheap but there are other costs to take into account: STRATE, VAT, trading and brokerage costs, investor insurance. These can actually add up to a substantial amount. You also have no guarantee if liquidity even if they have a market maker. When you need to cash out your ETF it could take days for the transaction to complete (my one ETF I cashed out took 3 days, multiple trades and an email to CoreShares).

 

So unit trusts may have management fees but they are a lot less hassle. And if you do your homework and the unit trust us not subject to initial fees or performance fees they may actually be cheaper.

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Have you guys heard of Afrifocus Securities?

 

Our Portfolios are a combination of unit trust and bespoke style investment vehicles. So all the portfolios look alike but they are managed as personal bespoke portfolios. The combination of the two styles provide the safety and convenience of UT with the flexibility and performance of a bespoke portfolio. Management fee of 1%

 

www.afrifocus.co.za there's options of balanced, income, active managment, 100% equities, moey market and TFSA accounts.

 

Check it out, I would like to hear your comments with regards to fees, structure, performance vs the UT you guys are in.

(if you cant find the info you are looking for ill can answer them for as the website is being upgraded)

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The only reason I know about Afrifocus us because they are one of our white label clients

 

what product would that be?

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Hi. Platinum Wealth asked me to comment on unit trusts vs ETFs.  The first thing is that unit trusts can be managed actively eg. Allan Gray, or passively, eg. Sygnia Top40 Index Fund or Sygnia Skeleton Balanced 70 Fund.  All ETFs are passively managed, tracking particular market indices.  I will limit my comparison to passive unit trusts vs ETFs.  

 

In South Africa unit trusts are significantly more cost effective than ETFs - so a Top40 Index tracking unit trust is significantly cheaper than a Top40 Index tracking ETF.  The reason is that to access a unit trusts you only have to pay the management fees and trading costs (all disclosed on fund fact sheets).  That is it.  If you do not use a financial advisor, that is all you pay.  In fact, with Sygnia's index tracking unit trusts, if you want to invest via a retirement annuity or a tax free savings account, those charge nil administration fees.  

 

In terms of ETFs you have to pay multiple layers of fees before you can actually access an ETF.  The reason is that ETFs are both unit trusts and "shares" listed on the JSE.  Some of these fees are:

- Stockbroking fees every time you buy or sell an ETF (you have to use a stockbroker)

- JSE trading costs relating to ETFs themselves

- Management fees within the ETFs 

- Bid/offer spreads between buy prices and sell prices (This is the most disingenuous aspect of ETFs - the price of an ETF at a point in time is subject to supply and demand by investors, like any other share.  So you might be paying more for the ETF than the value of the underlying "index" shares it holds, and when you sell you might be selling for less than the "index" shares are worth.  In South Africa, where liquidity is poor, the market maker normally steps in.  A market maker makes his money from the bid/offer spreads. So realistically 1% to 3% spreads are common).  

- If you want to invest via debit order, you are normally sold an "investment plan" by a platform like etfSA or iTransact.  That is another 0.70% pa fee plus R3.50 per month debit order fee.

- If you want a savings product, like a retirement annuity, that costs another 0.50% pa plus.

 

So once you have added all the costs of accessing ETFs you are paying more than you would for an actively managed unit trust.  That is what the ETF providers are skirting around all the time.  Since Sygnia always does things differently, we plan to launch ETFs later this year where we charge nil stockbroking and we guarantee a minimum bid/offer spread.  Let's see if we can shake things up a bit.  But frankly, even with best intentions, I don't think our ETFs will be as cheap as our unit trusts tracking the same market indices.

 

The final comment is that ETFs are asset class specific e.g. equities, bonds.  Sygnia Skeleton Funds on the other hand mix asset classes together in sensible proportions for different risk profiles.  So by holding one index tracking investment you get exposure to both domestic and International equities and bonds.

 

Hope this helps.  If you have any questions, I will answer them.

Magda Wierzycka

CEO

Sygnia

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- If you want to invest via debit order, you are normally sold an "investment plan" by a platform like etfSA or iTransact.  That is another 0.70% pa fee plus R3.50 per month debit order fee.

 

 

We have a celebrity! :P

 

Regarding the above, I think that already started to change with EE allowing debit order investing at no charge and FNB's Share Saver allowing the same for the last couple of years (albeit very limited).

 

Waiting for those ETFs though! I'm assuming there are no more details available regarding them nor a possible launch date?

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I went through the fact sheets of that All Stars multi manager unit trust this morning. Investing in that one unit trust gives you exposure to all of these funds (the headings aren't 100% accurate though):

 

Equity:

Nedgroup Entrepreneur Fund

Allan Gray Equity Fund

Truffle Asset Management

Coronation Asset Management

Salient Quantitative Investment Management

STANLIB Asset Management (Passive)

Foord Equity Fund

Prudential Investment Managers

Visio Capital Management

 

Offshore:

Aberdeen Asset Management

AllianceBernstein

Arrowstreet Capital

Capital Group

Hosking Partners

Veritas Asset Management

 

Property:

Bridge Fund Managers

Catalyst Fund Managers

STANLIB Asset Management (Active)

STANLIB Asset Management (Passive)

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Years later, do any of you own Unit Trusts?

 

I am looking at a 10x one or Sygnia unit trust now -- my portfolio on the JSE over the past 3 years have been negative, time to give this back to the pros.

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