South Africa's unit trust industry has adopted a new measurement standard aimed at providing investors with more accurate disclosure of fund performance.
The new standard strips out the initial (upfront) charges from the performance calculations, but still includes annual fees.
Di Turpin, the executive vice-chairperson of the Association of Collective Investments (ACI), says the new system, which came into force on June 30, allows for performance to be calculated on a net asset value (NAV) basis.
"It will provide an accurate picture of portfolio managers' abilities against a uniform benchmark and a more accurate comparison of performance with funds in different industries," Turpin says.
Investors access their unit trust investments in a variety of ways. Fees are charged inside and outside the fund, and may also be in the form of initial, exit, performance or service fees, making the original method of calculating performance rather meaningless and irrelevant in relation to most investors' actual position, she says.
The changes follow on the Collective Investment Schemes Control Act, which introduced a simplified method of pricing unit trusts.
From March 2003, local unit trust management companies were required to issue only one price (the NAV) at which unit trust transactions occur, rather than two prices (a buy and a sell price). The ACI has recommended that the maximum initial fee be published as a percentage.
Client statements now show a breakdown of fees between the fund manager and the adviser.