How To Start A Unit Trust In South Africa

What is unit trust?

A unit trust is a form of collective investment constituted under a trust deed. A unit trust pools investors’ money into a single fund, which is managed by a fund manager.

How To Start A Unit Trust In South Africa

How Do I Set Up a Unit Trust?

Choosing Roles in a Unit Trust. The two key roles in a unit trust are the trustee and the unitholders.
Drafting the Trust Deed.
Preparing Other Necessary Documentation.
Settle Your Trust.
Shareholders and Unitholders Agreement.
Consider Stamp Duty.
Additional Registrations.

Frequently Asked Questions (FAQ)

How do I get a unit trust in South Africa?

You can invest in a unit trust fund through financial services providers such as a broker; an Investment Management Company or in some cases through your bank. A unit trust fund is a pooled resource, which means that it allows a group of investors to combine their cash and invest it.

How does a unit trust work in South Africa?

Funds are pooled together with other investors. Then the entire investment portfolio is divided into units representing an interest in the overall portfolio. Unit trust funds are governed by the Collective Investment Schemes Control Act.

How do you profit from a unit trust?

You invest in a fund by buying units in the fund. There is a capital gain when the price of the units rises above the price you paid for the fund. Some funds pay dividends. The price of each unit is based on the fund’s net asset value (NAV) divided by the number of units outstanding.

Where do unit trusts invest?

Unit trust is a collective investment scheme that allows investors with similar investment objectives to pool their funds together. These funds will be invested by professional fund managers in a portfolio of securities according to the fund’s

Can you lose money in unit trusts?

The fund will pay out any quarterly or bi-annual returns as either income or growth, and you can usually decide how you want to receive the money. Remember that returns are not guaranteed, and that you can also lose money.

Is a unit trust a fund?

A unit trust is a type of mutual fund where money from many investors (called “unit holders”), is managed by a fund manager to achieve a specific return. This fund manager then creates a portfolio of investments and assets.

Are unit trust a good investment?

Unit trust investments provide a good foundation for individual investors to fulfill their financial aspirations. However, investing in unit trusts with misconceptions and insufficient knowledge often result in unnecessary disappointments for investors when their expectations are not met.

What is Absa unit trust?

A Unit Trust pools money and invests in shares, bonds, money market instruments and other investments. The pool is then divided into equal portions called units. Each unit has a price or Net Asset Value (NAV) based on the value of all the assets held in the fund.

Do unit trust pay dividends in South Africa?

Unit trusts include all the above-mentioned payments (dividends, income and interest) into one cash distribution that can be paid out or reinvested. The payments from the underlying instruments are accumulated in the unit trust and then periodically (monthly, quarterly or semi-annually) paid out.

Why is unit trust not good?

The Bad. Investing in unit trusts typically incur higher fees than other investment instruments like Exchange Traded Funds, as you have to pay for the management, marketing, accounting and switching costs of the unit trust.

How is unit trust price calculated?

The unit price is based on the fund’s net asset value (NAV) divided by the number of units outstanding. You will need to pay sales or redemption charges when you subscribe to or redeem units. Recurring fees are paid by the fund and include management fees, trustee fees and other fees. These costs are passed on to you.

How do you buy a trust fund?

Take your trust documents to a bank or financial institution and open a trust fund bank account with the same name as the trust. You will need to provide the names and contact information of the trustees. You can either deposit a lump sum or pay into the trust over time.

Can I buy unit trust online in South Africa?

Finally, online unit trust marketplaces are one-stop online platforms where you can find hundreds of unit trust funds that you can invest in.

What is a unit trust example?

A Unit Trust apportions trust assets according to ‘units’. As a Unit Holder, you get beneficial ownership of trust property according to the number of units you own. For example, you have 150 units and I have 50 units.Therefore, you own 75% of the Unit Trust assets.

What is the return of unit trust?

The return on investment of unit holders is usually in the form of income distribution and capital appreciation, derived from the pool of assets supporting the unit trust fund. Each unit earns an equal return, determined by the level of distribution and/or capital appreciation in any one period.

How can I buy unit trust from public bank?

Purchase or investment of Unit Trust funds and PRS funds can be performed via Public Mutual Online (PMO) at https://www.publicmutualonline.com.my/. The PMO registration is available at PBe, the Bank’s Automated Teller Machine (ATM) and PMO.

Do unit trusts pay tax?

A unit trust is not generally taxed at all. Instead, the unitholders are taxed on their share of the trust’s income. However, sometimes there is trust income that no unitholder is entitled to. In this circumstance, the trustee is taxed at the highest marginal tax rate (45%).

How long does it take to sell unit trusts in South Africa?

An instruction to buy or sell a fund, once confirmed, usually takes four days to complete and be shown in your completed transactions. Sometimes the transaction completes more quickly, but we suggest waiting five working days before contacting our experts to query a transaction settlement date.

How much do you need to earn to pay tax in South Africa?

R87 300 if you are younger than 65 years. If you are 65 years of age to below 75 years, the tax threshold (i.e. the amount above which income tax becomes payable) is R135 150. For taxpayers aged 75 years and older, this threshold is R151 100.

How are unit trusts traded?

Most people choose to invest in an investment fund rather than buying shares directly on the stock market. There are many different types of fund. Some, like investment trusts and exchange traded funds, are traded on the stock market and can be bought and sold via a stock broker.

Which is better ETF or unit trust?

Unit trusts (or mutual funds, as they are known as in the US) are often discredited for their supposedly high costs and more active investing approach. In contrast, Exchange-Traded Funds (ETFs) are generalised as being lower cost, and generating higher returns due to a more passive investing approach.

How long does it take to redeem Absa unit trust?

Cheque payments will be paid out 15 (fifteen) working days after deposit date. A closed account cannot be re-activated. A new account must be opened for any subsequent investment. Account closure and redemption instructions are subject to the account meeting the requirements of the Financial Intelligence Centre Act.

What is fixed income unit trust?

Fixed income funds are mutual funds that focus on investing in debt securities, in which debt securities will show creditors to holders of a document. Example of debt securities includes government bonds and debentures.

Can unit trust make you rich?

You may not grow your wealth with dividends, but unit trusts help you grow your wealth through capital gains. Depending on the fund’s performance, the NAV of the units you have purchased can increase or decrease. If their value increases to more than what you paid for them, you will get capital gains.

How do unit trust agents make money?

Unit trust consultants bag a hefty commission for both cash and EPF withdrawals, ranging from 1.5% to 2.75%. Other positions like agency supervisor, agency manager and group agency managers get different commissions percentage.

Can you lose money in unit trusts?

You may lose a substantial amount of the money you invested in certain situations. The risks of investing in the fund are described in the product offering documents such as the prospectus and the product highlights sheet. Fees can also reduce your returns.

Who is the legal owner of a unit trust?

The trustee is the legal owner of the assets in the trust, holding the assets for the benefit of the underlying unit holders. The trustee has an important policing role, ensuring that the manager complies with the terms of the legal document that created the trust, the ‘trust deed’.

What is the difference between an investment trust and a unit trust?

A key difference between investment trusts and others funds such as unit trusts and OEICs is that they’re closed-ended, in that there’s a limited number of shares in existence. When investors want to buy into a unit trust or OEIC, the manager makes it possible by creating new units and then invests this new money.

How many funds should I invest in?

Hold one fund each in Large, Mid and Small Cap category. Within the same theme/market cap, you need not have more than two funds as a thumb rule. You will do extremely well with one fund. If the need arises, stretch it to two but not beyond that.

How much does it cost to set up a trust fund?

If you hire an attorney to build your trust, you’ll likely pay more than $1,000, and fees will be higher for couples. You can also use online software to create trust documents at a cheaper rate.

Where do unit trusts invest?