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The savings rate among South Africans is too low, and increasing the savings rate is critical for the financial wellbeing of citizens and for the country. Many South Africans do not make use of formal savings products, including unit trusts. However, there is a need to increase the use of unit trusts and thus the savings rate, and ultimately the financial wellbeing of consumers. Unit trusts are well-designed savings/investment vehicles, allowing for small investment amounts with affordable cost structures catering for consumers with different risk profiles. Therefore this study will focus on investigating consumers’ perceptions of unit trusts by identifying the factors which influence consumers’ intention to use unit trusts as an investment vehicle. A quantitative study was employed and for the empirical investigation a convenience sample of 509 respondents completed a self-administered, structured questionnaire. The data was quantitatively analysed and the main results showed that the Accessibility and Benefits of unit trusts are the most important factors influencing consumers’ Intention to use unit trusts. The strategies explained in this study may assist financial service providers in encouraging consumers to use unit trusts as an investment vehicle. This may increase the country’s savings rate and ultimately improve the financial wellbeing of South Africans.

This research addresses a gap in the literature on responsible investing (RI) in South Africa by studying the risk-adjusted performance of RI unit trusts available to retail investors. The Sharpe, Sortino and Upside-potential ratios for 16 RI unit trusts, their benchmarks and a matched sample of conventional unit trusts were calculated for the period 1 June 1992 – 31 August 2011. Most of the RI unit trusts in South Africa use exclusionary screens based on Shari’ah (Islamic) law with the remaining funds focusing on social issues, such as labour relations and social development. The total expense ratios of RI unit trusts are slightly higher than those of conventional funds, but no different from that of their benchmarks or a matched sample of conventional unit trusts. It is suggested that local assets managers expand the range of retail RI unit trusts available in the country.

The residual variance method is the traditional method for measuring portfolio diversification relative to a market index. Problems arise, however, when the market index itself is not appropriately diversified. A diversification measurement (Portfolio Diversification Index), free from market index influences, has been recently introduced. This article explores whether this index is a robust and 'good' diversification measure compared with the residual variance method. South African unit trusts are diversification-ranked using the two measures and the results compared to the ranking results of several risk performance measures. Measuring relative concentration levels allows concentration risk to be effectively managed, thereby filling a gap in the Basel accords (which omit concentration risk). http://reference.sabinet.co.za/webx/access/electronic_journals/jefs/jefs_v5_n1_a10.pdf

Fund managers in the South African unit trust industry have an objective of generating strong alpha returns, meaning average annual returns above the respective benchmark. This paper analyses the performance of twenty South African unit trusts, selected from various sectors over the 1998 – 2002 period. In all cases the benchmark used by the funds is the Johannesburg Stock Exchange All Share Index. The well-known Capital Asset Pricing Model and a three-factor Arbitrage Pricing Theory model are used in the analysis. The result shows that only four funds of the twenty analysed were able to generate a superior performance in one or more years of the five-year period. Individual unit trusts were unable to perform consistently for any length of time. The failure of the funds to meet their objective is further analysed in terms of the appropriateness of the JSE All Share Index as the benchmark. In some cases the index was not an appropriate benchmark to measure persistence in performance and sector indices were preferable. In a cross-sectional portfolio analysis there was evidence of overall persistence in performance but this was of short duration, related more to negative than positive persistence in performance. Overall, the results of the analysis do not produce convincing evidence that unit trust fund managers were able to generate consistent above average returns to their investors. Furthermore, it may be preferable from an investor’s viewpoint if fund managers were to target an absolute rather than a relative benchmark.

This study examines persistence of performance in South African general equity and fixed income unit trusts over the period January 1989 to December 1999. The formation and holding periods studied ranged from one quarter to two-years. Significant persistence was found for most combinations of formation and holding periods for risk-adjusted equity unit trusts. It is suggested that choosing equity unit trust winners from the previous two-years and holding them for the next two-years may be the best long-term strategy to adopt. The fixed income unit trusts showed far less significant persistence than the equity unit trusts with loser-loser persistence predominating.

The persistence of performance of the General Equity Unit Trusts and All Unit Trusts that traded in South Africa during the period January 1988 to December 1997 and January 1993 to December 1997, is analysed using three models of performance measurement, namely the Capital Asset Pricing Model, a two-factor Arbitrage Pricing Theory model and a three-factor Arbitrage Pricing Theory (APT) model developed in this study. The Capital Asset Pricing Model does not explain the relative returns of the different portfolios. Both APT models account for almost all of the cross-sectional variation in expected returns. It is shown that there is evidence of both short-term and long-term persistence in performance of South African unit trusts. It appears that the worst performing unit trust portfolio tends to stay the worst performer. The portfolio of unit trusts with an average monthly return may eventually become the top performing portfolio, while the top performer over time tends to becomes an average performing portfolio.

The purpose of this study was to determine whether any persistence of performance existed in the unit trust industry in South Africa over the ten-year period from July 1985 to June 1995. Calculations were done over different time periods (one-, two- and four-year periods) and using different definitions of superior performance (positive Jensen alphas or winner/loser phenomena). Results of nominal returns and risk-adjusted returns were also compared. Results obtained show that persistence in performance does exist, but that it is more of a 'loser' phenomenon than a 'winner' phenomenon.

The article reports the results of an investigation into the level of predictive accuracy required to benefit from a market-timing strategy using unit trusts as the investment medium. Three unit trusts within the same management company were used as the assets between which a market timer could switch his or her investment. Switching would depend on the timer's forecast of which of the three investments would produce the best returns in the forthcoming period. Remaining within the family of trusts managed by a single company kept the transaction costs to a minimum. Investments could be made in a general equity, a resources or an income unit trust. As attractive as the potential returns from market timing within a family of unit trusts might appear to be, the levels of predictive accuracy required to beat a buy-and-hold strategy with certainty were found to be extremely high (of the order of 80%). In addition, much of the benefit from timing depends on being in the highest yielding asset for a small, but specific number of periods. Therefore not only does one require a high level of predictive accuracy, but it is important to be correct in the key periods when most of the return above the buy-and-hold is earned.

The application of the standard techniques of portfolio selection on the 34 sectors comprising the JSE All Share index is undertaken for the three equal non-overlapping five-year periods between February 1965 and January 1980. Efficient portfolios in each period which carry the same risk as the market index are seen to outperform the market substantially. Portfolios chosen at random to span the efficient frontier in each period reveal the consistent inefficiency of 10 sectors over the 15-year period. Three of these sectors, namely Mining Holding, Mining Houses and Industrial Holding are shown to be favoured in the Association of Unit Trusts portfolio relative to these sectors' proportion of the market. On the presumption that unit trust managers attempt to act efficiently, holding these sectors is only justified if the measure of risk used in the portfolio selection algorithm, namely standard deviation of expected return, is less appropriate than other measures of risk such as earnings volatility. If standard deviation of expected return is a more appropriate measure of risk in the selection of efficient portfolios, it must be concluded that the large sophisticated investors managing the unit trusts act inefficiently.