Industry set for shake-upA NUMBER of exciting changes are in store for the local industry this year - and most of them will shake up the market to the benefit of investors.
Market-driven investor charges, increased competition from international asset management companies and a range of new unit trust products are but a few of the changes on the cards.
Anton Kok, newly appointed chairman of the Association of Unit Trusts, predicts that options for unit trust investors will increase at least fivefold this year, aided by the imminent deregulation of the Unit Trust Control Act.
"I will not be surprised to see 100 new unit trust management companies start up during 1998 - most of them foreign companies - with a total of 500 unit trusts being offered locally."
But Kok is not phased by the prospect of increased competition from foreign companies. He believes that local companies with strong brand names and known investment management teams will be able to stand their ground.
The proposed changes to the Unit Trust Control Act relate mainly to the introduction of the funds of funds concept and the deregulation of investor charges.
Kok does not expect charges to decrease, but says upfront charges may be reduced while exit charges will appear for the first time.
Asset management company m³ Capital says 1998 is the year of multiple manager funds. Multi-manager unit trusts, wrap funds and funds of funds are being introduced to the local market for the first time.
All of these products are favoured for their ability to spread investment risk away from a single asset manager.
Wrap funds represent a managed alternative to linked products. They are voluntary investment products created by "wrapping" together unit trusts, targeted to meet specific investment objectives.
Funds of funds are expected to make their debut in South Africa later this year when the Collective Investment Act is passed by Parliament.
A fund of funds is a unit trust which invests in other unit trusts. Fund of funds may not invest more than 20% in any one underlying unit trust.
Multi-manager unit trust funds are not entirely new to the local market, although they are rare - this type of unit trust was first introduced into the local market in December last year by m³ Capital.
Rather than investing in a variety of unit trusts, an investor can select a single unit trust, enjoying exposure to a variety of fund managers and styles.
Already the linked-product industry is bracing itself for the expected onslaught of competition from the above mentioned products - from last year until now minimum investment amounts have dropped from R50 000 to R25 000.
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