The Retirement Unit Trusts Beating The Rest

In every industry there are some winners and losers. Finweek analyses the best performers in three categories of unit trusts best suited to park retirement savings over one and five years.

- Jaco Visser

For most taxpayers, the month of February is a time to reconsider their tax-deductible provisions for retirement. This usually entails contemplating one’s investment objectives and comparing them with the performance of your current investments. As many of us provide for our retirement (and some discretionary savings) through collective investment schemes (unit trusts), an analysis of the performance of these savings vehicles suffices from time to time.

Broadly, but not exclusively, there are three categories of unit trusts which allows, within the confines of the Pension Funds Act, for those saving for retirement to park their nest eggs. On the riskier side there are the multi-asset, high-equity funds which one can refer to as balanced type funds. They’re usually not shy to utilise fully their allowed 75% allocation to shares (or equities).

Moving to the less risky side of the equilibrium, we get the multi-asset, low equity funds which we can call defensive type funds. They’re more careful when it comes to the 75% allocation to shares and would usually not go that high, rather investing in more fixed-income-type of assets (such as bonds).

The third type of fund, which is more geared towards the absolute preservation of a retiree’s investment capital, is multi-asset income funds, which we’ll refer to as income-type funds. (This should not, however, be confused with the pure fixed-income type funds.) These unit trusts allocate a large proportion of their cash to fixed-income-type assets and aim to beat at least the effect of inflation.