Integre Investment Management
"..building long-term wealth for clients""..building long-term wealth for clients"

Discussion


A Unit Trust, the name with which the investing public may more familiar, is classified by the Financial Services Board (FSB) as a Collective Investment Scheme (CIS) and is subject to the relevant legislation. The legislation and guidelines are intended to protect the final investor.

In brief, a CIS is a structure which allows investors access to a larger portfolio of assets through the pooling of their funds into a vehicle which is managed by specialists. The legislation and regulations determine the parameters in which a particular fund may invest but also allows a predefined degree of latitude to the investment manager.

In comparison to a bespoke portfolio, a CIS has both advantages and disadvantages and investors should weigh these up and decide, possibly in consultation with their financial advisor, what is appropriate and practical to their needs and circumstances.

The primary advantages are:
  • A CIS allows investors to share in the performance of the entire fund from the investment date.
  • A Capital Gains Tax event occurs only when units are sold; that is, the buying and selling of shares within the portfolio, does not generate a CGT event for the client.
The primary disadvantage is that the CIS portfolio is not tailor-made to the specific needs of the client.

While management fees, trading charges and cost considerations may appear to be defining, the end-results do not always support the original argument. Similarly, bespoke portfolios may or may not outperform CIS.

While statistical analysis may not yield a preferable direction – particularly about the future, a few time-worn maxims may be useful to the investor:
  • Invest for the long-term
  • Diversify across asset classes and within asset classes
  • Balance risk and the search for reward with your temperament and means
  • Remember it is your money; ultimately you are responsible for it
  • Select your advisor carefully; do not be afraid to ask difficult questions; check backgrounds and track records.

It is important for investors to understand the nature of each CIS investment vehicle, the extent of the diversification, focus of the fund, costs, distribution policy, etc.

Intégre offers clients a CIS investment vehicle which is discussed below.