EDUCATIONAL INSIGHT

ETFS VS UNIT TRUSTS

Article by Satrix Investments

ETFS VS UNIT TRUSTS


There are three ways to invest in a Satrix tracker fund (also called index funds): 

Either through a

  1. Unit Trust or an
  2. Exchange Traded Fund (ETF) or through 
  3. the Satrix Retirement Plan

All three vehicles offer essentially the same investment but the different investment structures provide for different investor needs.


In the case of both Unit Trusts and ETFs the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund/portfolio) of the underlying investments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETF, the participatory interest comprises a security or share listed and traded on a stock exchange.


Both products offer investors access to the performance of an underlying pool of assets via a single transaction. These assets, depending on the index being tracked, can include shares, bonds, cash or property. In the case of both ETFs and unit trusts, because they are both portfolios established under a collective investment scheme, both vehicles are regulated by the Financial Services Board (FSB) and are subject to the Collective Investment Schemes Control Act (CISCA). Both structures (the individual collective investment schemes) and the performance of the duties of the Manco are overseen and monitored by an independent trustee (to ensure compliance with CISCA and the protection of the interest of investors).


The Satrix Retirement Plan (SRP) is a retirement annuity which is a savings vehicle designed specifically for you to save for retirement. Prior to retirement and whilst you are still contributing to the SRP you will receive a tax savings up to a certain limit on the amounts you contribute. At age 55 you are able to take one third of the money you have saved as a lumpsum (subject to taxation) and the rest you must use to purchase a compulsory annuity which will pay you a monthly amount into retirement.


Satrix has two Regulation 28 unit trust funds which are available for selection as the underlying investment in your Satrix Retirement Plan.

  • A moderate risk fund, the SATRIX Balanced Index Fund
  • A cautious fund, the SATRIX Low Equity Index Fund     

You will need to choose one of these two unit trust funds or a combination of both for your SRP.


POSTED : 8 DECEMBER 2016

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