Sixty years on, are unit trusts still a good investment?

Stephen Grootes talks to Warren Ingram, director of Galileo Capital.

Sixty years on, are unit trusts still relevant  in today's investment environment?

The benefits are clearly working for investors, as both local and international unit trusts remain popular in South Africa.

They are seen as a relatively safe form of collective investment, with transparent records provided to buyers.

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Personal financial adviser Warren Ingram explains the concept in simple terms as a group of people who probably don't know each other, clubbing together to put their money into one large pool.

The important thing is that this 'pool' is administered by an independent custodian.

Warren also highlights how unit trusts have broadened out over the years to offer more options.

"The custodian keeps a record of the money everybody puts in, and then that money is invested on behalf of all of the individual investors by a fund manager."

Warren Ingram, Director - Galileo Capital

"They have diversified away from just shares on the local stock exchange, as fund managers started buying bonds, buying cash and creating money market unit trusts. Over the last 60 years they've actually created many hundreds of different kinds of unit trusts so you can do everything from buy a generic money market account right up to a global fund that invests in shares."

Warren Ingram, Director - Galileo Capital

Then there is the balanced unit trust, which creates a particularly steady, long-term form of income generation.

A very important factor to keep in mind is that no-one owns the assets of a unit trust except the actual investors themselves, Ingram says.

"So the benefits are that it's very well-regulated, independently administered by a custodian and then a fund manager who manages the money according to a particular mandate or benchmark or agreed objective for the fund."

Warren Ingram, Director - Galileo Capital

"That's why the unit trust has been around for so long."

Warren Ingram, Director - Galileo Capital

Ingram also discusses the different types of unit trusts and any possible downsides - take a listen in the interview audio up top