What is a unit trust fund?

Key takeaways

  • Unit trusts pool investors' money to give you easy and affordable access to financial markets.
  • The investments are chosen by a professional experienced fund manager.
  • The fund mandate sets out how the manager will invest.
  • Funds may be diversified across securities, asset classes and/or regions.
  • Your investment buys units in the fund.

A unit trust fund is an investment that gives you easy and affordable access to financial markets like the JSE and the bond market with the potential to grow your savings.

Your aim should be to achieve growth that at least beats the inflation rate. A return that beats inflation is called a real return. Read more: Why must my investment beat inflation?

When you invest in a unit trust fund, you pool your money with that of thousands of other investors in a fund and an experienced investment professional selects which shares, bonds, property shares, money market or other securities to buy for the fund.

Each fund has an investment mandate that sets out how the manager will invest – the investment universe from which securities will be selected and the manager’s aim – to grow capital or earn income – and the investment horizon.

Diversification at lower cost

Investing in individual shares may require more money than you have and picking just one or a few shares is risky. By investing all your money in one share, you are effectively putting all your eggs in one basket and if this basket loses its value, so does your entire investment. Read more: Why should I diversify my investments?

In a unit trust fund, depending on its mandate and classification, your investment can be diversified in a number of ways:

  • The financial instruments (shares, bonds or other securities) from a number of different companies picked by the fund manager will be included.

  • Different types of financial instruments can be included, for example, a combination of shares and bonds.

  • The fund manager, in line with the mandate of the fund, can invest across a range of asset classes.

  • Managers of worldwide, regional and foreign funds can diversify across different geographical areas and currencies.

Your money buys units in the fund, depending on how much you invest.


  • Historians are not exactly sure who should get the credit for creating a unit trust, but it is generally accepted that these funds first made their appearance in the late 1700s in the Netherlands. The fund was appropriately called the Eendragt Maakt Magt Fund, which translated means the Unity Creates Strength Fund.

  • The first South African unit trust was launched in 1965. Today there are more than 1 680 funds. There are more than 125 000 unit trust funds – known as mutual funds - worldwide. Unit trusts are popular worldwide, because they make it easy to invest in complex financial markets.