Following our previous article on the Fairtree Blended Equity Prescient Fund’s one-year anniversary, we would like to shed light on the recent ASISA category changes and what they mean for you when comparing funds.

Understanding the ASISA category changes

Effective 1 October 2024, ASISA introduced updates to its Fund Classification Standard. These changes were prompted by the South African Reserve Bank’s decision to increase the offshore investment limit for institutional investors to 45%. The intended purpose of these changes was to improve the comparability of unit trust portfolios by aligning them more closely with their investment mandates and risk profiles.

One significant update is the introduction of the SA Equity – SA General Category (referred to as SA Equity Category), alongside the existing SA Equity – General Category (referred to as General Equity Category). This new category is designated for portfolios investing exclusively in South African equities. As a result, approximately 60 portfolios transitioned from the General Equity Category to this new classification.

Implications for Fairtree funds

The Fairtree Blended Equity Prescient Fund remains within the General Equity Category, reflecting its diversified strategy that includes both local and offshore equities. In contrast, the Fairtree Equity Prescient Fund has been reclassified into the SA Equity category, aligning with its focus on South African equities.

Fairtree’s observations 

1. Lack of offshore exposure

Despite ASISA’s efforts to enhance comparability, there is a significant variation in offshore allocations in the General Equity Category. We have observed that approximately:

• 45% of funds have no offshore exposure.
• 32% have less than 20% offshore exposure.
• 23% have offshore exposure exceeding 20%.

The significant variation highlights that making direct comparisons within the category is still extremely challenging.

2. Benchmark misalignment

Among the 26 funds with offshore allocations exceeding 20%:

• Six funds utilise benchmarks focused solely on South African equities, lacking any global equity component.
• Nine funds use the General category average, which inherently is predominately South African equities, as discussed above.

This misalignment can lead to inaccurate performance assessments. In contrast, Fairtree adopts a comprehensive composite benchmark—65% Capped SWIX and 35% MSCI ACWI—that accurately represents both local and global allocations, ensuring precise and meaningful performance evaluations.

Source: Morningstar as of November 2024

We trust this update provides clarity on the recent ASISA category changes and their implications for your investments. Our commitment remains steadfast in delivering performance excellence and transparency.

If you have any questions or require further information, please do not hesitate to contact us.

Karena Naidu, Global Investment Specialist

Disclaimer:

Fairtree Asset Management (Pty) Ltd is an authorised financial services provider (FSP 25917). Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CISs are traded at the ruling price and can engage in scrip lending and borrowing. A schedule of fees, charges and maximum commissions is available on request from the Manager. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. Performance has been calculated using net NAV to NAV numbers with income reinvested. There is no guarantee in respect of capital or returns in a portfolio. Prescient Management Company (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). For any additional information, such as fund prices, fees, brochures, minimum disclosure documents and application forms, please go to www.fairtree.com.