“Unit Trust Investments are Africa’s next big thing,” says Andre Roux, Senior Manager for Sanlam Emerging Markets. Speaking to Gazette Business at the Sanlam headquarters in Bellville, Cape Town, Roux said that the appetite for Unit Trusts was on the rise and will be a significant investment vehicle in the continent in a few years.
Unit Trusts are Collective Investment Undertaking, where investors’ funds are pooled together into a portfolio to purchase into particular investments. This is generally considered a low-risk, low-return investment. Unit Trusts compared to Mutual funds typically incur lower annual operating expenses. The major difference between a Unit Trust and a mutual fund is that a mutual fund is actively managed, while a unit investment trust is not managed at all, according to Money Web. Capital gains, interest and dividend payments from the trust are passed on to shareholders at regular periods. South Africa has a largely developed Unit Trust market as interest in the investment has grown and has continued to outperform other platforms, with up to 967 funds available. The market is worth R1.3 trillion according to the Association for Saving and Investment South Africa.
“It will take about two to three years for consumers to understand and for advisers to be comfortable with them,” Roux said, indicating that with more knowledge and education by both retail investors and fund managers and a solid administration system, Unit Trusts in Africa will grow extensively with Botswana included.
Local fund managers, Botswana Insurance Fund Management, also a subsidiary of Sanlam through Botswana Insurance Holdings Limited, has beamed about the response they have garnered since the launch of four of their own Unit Trusts Money Market, Balanced Prudential, Equity Fund and Offshore Fund unit trusts. The investment starts as low as P200 monthly which is an attractive proposition for lower income investors according to the company.