How Unit Trusts and ETFs Are Classified

Collective investment schemes, which include unit trust funds and exchange-traded funds (ETFs), are classified according to the types of assets they hold and where these assets are located geographically. Knowing how the classification system works makes it easier to choose a fund that suits your investment requirements as well as enabling a fair comparison of funds of the same type.

The classification system, instituted by the Association for Savings and Investment South Africa (Asisa), the body representing the local life insurance and asset management industries, applies to funds managed by South African investment firms and denominated in rands. Offshore funds marketed in South Africa, denominated in currencies such as the US dollar, are not bound by this system, although the categories are similar.

The system has been in operation since 2013, when Asisa published its Fund Classification Standard. The latest update, which introduced a few new categories while scrapping others, became effective on 1 October 2024.

According to Asisa, there were 1 883 unit trusts and ETFs in South Africa as at March 2025, collectively holding assets of almost R4 trillion.

There are three tiers of classification. Funds are classified first according to the geographic location of the underlying investments, second according to asset type, and third according to investment focus.

First tier: geography

There are three categories:

1. South African: the bulk of the portfolio (at least 55%, down from 75% in 2013) must be invested in the local market.

2. Worldwide: the portfolio may invest in local and offshore markets without restrictions.

3. Global: the bulk of the portfolio (at least 80%) must be invested in offshore markets.

A fourth category, Regional, which catered for funds investing in specific countries or offshore geographical regions, has fallen away, with these funds now incorporated into the Global category.

Second tier: asset type

The four asset classes are listed shares (equities), listed property, bonds and cash. The categories in the second tier are:

1. Equity: at least 80% of the portfolio must be invested in shares listed on the JSE or foreign stock exchanges.

2. Multi Asset: the portfolio may invest in the different asset classes in varying proportions.

3. Interest Bearing: the portfolio must be invested exclusively in bonds, money-market instruments and other interest-based securities.

4. Real Estate: investments must be almost exclusively in listed property companies and real estate investment trusts.

Third tier: investment focus

Funds are further classified as follows.

• Equity funds may be General, Large Cap, Small and Mid Cap, or specialise in market sectors such as Industrial or Resources shares.

• Multi Asset funds may be Flexible (no restrictions on asset class allocations), have restrictions on equity allocations (Low Equity, Medium Equity or High Equity), or focus on Income.

• Interest Bearing funds are categorised according to whether they hold money-market instruments (Money Market), shorter-term bonds (Short Term), or a mix of short- and long-term instruments (Flexible).

• There are no third-tier categories for Real Estate funds apart from General.

The 2024 standard introduced two South-Africa-only sub-categories to the third tier: SA General to the Equity category and SA High-Equity to the Multi Asset category. This was because of the relaxation of the local component to 55% in (first-tier) South African funds. An Africa sub-category was added under Global Equity for funds investing in African stock markets outside South Africa.

The standard also introduced a Variable Inflation Linked Bond sub-category under Interest Bearing funds.

There are Unclassified sub-categories for funds with unconventional or unclassifiable investment mandates.

Examples

• SA Equity SA General: The fund must invest at least 80% of the portfolio in the equity market, across market sectors. The fund must be 100% invested in local assets.

• SA Multi Asset High Equity: The fund may invest up to 75% of the portfolio in the equity market and up to 25% in listed property. The remainder would need to be in bonds or cash. Investments across the asset classes may be up to 45% offshore.

• Worldwide Multi Asset Flexible: Under this classification the fund manager has a free mandate to invest in any of the four asset classes, globally or locally, in any proportion.

• Global Interest Bearing Short Term: The fund must be fully invested in short-term bonds and cash instruments of which 80% must be offshore.