Category Investments

All change...

14 August 2004 Angelo Coppola

(14.8.04) Satrix becomes first collective investment scheme to list on JSE.

From 1 August the three Satrix exchange traded funds – Satrix 40, Satrix Fini and Satrix Indi – will be registered as collective investment schemes (CIS) in terms of the CIS Control Act 2002.

Satrix will become the first CIS to be listed on the JSE Securities Exchange SA, paving the way for further JSE listings of CIS products.

The JSE announced that it would promote the listings of CIS following the declaration by the FSB that CIS products qualify as securities under the Stock Exchange Act and can therefore be listed.

The CIS registration for Satrix provides the retirement funds industry with major cost and efficiency benefits.

It will enable a pension fund to invest up to 75% of its assets in Satrix 40 at a fraction of the cost of individually purchasing the Top 40 equities and without incurring capital gains tax liabilities.

Mike Brown, manager of Satrix, said the fact that Satrix products now fell under the regulation of the FSB as well as the JSE Securities Exchange, would increase the peace of mind for investors.

Said Brown: “The major benefit for pension funds is that CIS products are offered see-through status under Regulation 28 of the Pension Funds Act.

In terms of this regulation, a pension fund may invest up to 75% of its assets in equities and shares and up to 15% of its assets in a single listed equity (when the market capitalisation of the company is R2bn or above).

As each of the Top 40 companies have a market capitalisation over R2 billion, pension funds can invest up to 75% of their assets in Satrix 40.  The only provision is that any one equity represented in Satrix must not exceed 15% of the fund’s total assets.

“Said Brown: “Many retirement fund industry and other investment managers are confined by their mandates to only invest in products regulated by the FSB, such as Collective Investment Schemes.

“With the Satrix classification as CIS funds, multi-managers, listed product providers and wrap funds will now also be able to use Satrix freely.” 

Other advantages of the Satrix CIS classification are:

  • As a listed CIS product, Satrix can be traded at all times of the day and investors are able to take advantage of intraday price movements and to benefit fully from market liquidity.  Other non-listed CIS products only trade at the close of business, when the CIS manager makes a price.
  • Capital Gains Tax would not apply to any portfolio rebalancing in Satrix as all CIS products are exempt from CGT. 
  • Satrix can remain fully invested in the index constituent stocks, as the CIS Act does not require a CIS to hold any of its assets in cash. 
  • All income of a CIS Trust is taxed in the hands of investors, and not in the CIS structure. 
  • The operating structure of Satrix will be simplified, saving costs to the benefit of investors in Satrix. The three Satrix Trusts will be managed under a single management company, Satrix Managers (Pty) Ltd, with Mike Brown as manager and compliance officer.


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