Does the size of your unit trust matter?

A look at how the size of a fund or fund manager impacts investors.

Orapa – Over the last fifteen years South Africa’s collective investment scheme industry has boomed. From 149 registered funds with R45.5bn under management in 1997, we now have nearly 1,000 funds with total assets under management of over R1.3trn.

As we revealed in an article last week, this industry has also developed very stark divisions between a handful of major players and a much wider pool of smaller funds and fund managers. Just seven companies have a combined market share of 59.9%.

But how much does this matter? What does it mean to be a big player or a small player in this market, and how does the size of a fund or fund manager impact on investors?

There is of course another aspect to this debate, which is the size of the fund managers themselves. In any market, those who already hold market share are at a distinct advantage. The collective investment industry is no different.

“You cannot discount the power of large-scale branding and distribution,” says the MD of 27four, Fatima Vawda. “We are competing against big balance sheets that can pay for sophisticated distribution channels, highly skilled business development teams and aggressive sales forces.