Are Your Balanced Funds Complying?

Are Your Balanced Funds Complying?


Balanced funds must comply with Regulation 28 of the Pension Funds Act

The majority of balanced funds sit in the South Africa- multi asset low, medium and high equity sectors. Currently, these sectors hold approximately 37% of the total assets under management in South African-registered unit trusts.

Related: Protect Your Pension

Funds in these sectors have restrictions regarding the assets in which they can invest. This makes them automatically compliant with Regulation 28 of the Pension Funds Act.

Balanced funds can have the highest permissible exposure to equity

Funds that comply with Regulation 28 may have up to 75% of their assets in equities, depending on their mandates. While volatile over the short term, equities have demonstrated the ability to grow the most above inflation over the long term.

As balanced funds can provide investors with the maximum permissible exposure to growth assets over time, they give investors the growth engine they need during the accumulation phase of their retirement saving strategy.

Balanced funds can diversify

As funds in the multi asset sectors can invest across a very wide range of asset classes, both in South Africa and beyond our borders, this allows them to provide their investors with a large degree of diversification across many industries, countries, regions, currencies and assets. Because diversification decreases risk, investors in these funds can achieve solid returns at lower levels of risk.

A professional manager manages and regularly rebalances your portfolio

Fund managers have the knowledge and experience to generally avoid assets that are more likely to lose value from time to time, and to acquire and hold assets that are more likely to increase in value from time to time.

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In addition, investors know that their managers will be able to switch their exposure to the optimal mix of assets quickly and efficiently, without them having to complete laborious documentation and follow a slow transfer process.

Balanced funds are also available in preservation funds and living annuities

Often you will have the same balanced fund available as an investment option in your retirement fund, your preservation fund and within a living annuity.

This means that investors in these funds can stay invested in the same fund throughout their full saving, preservation and income-drawing cycle. They can generally retain these investments even when they change jobs.

Rebalancing in a balanced fund does not lead to a capital gains tax event for the investor

Investors in unit trusts are not subject to capital gains tax (CGT) in respect of purchases and sales made within the unit trust.

Related: Protect Your Nest Egg

As balanced funds have the broadest exposure to the various asset classes, investors are able to gain or reduce exposure to different securities, instruments and currencies without this triggering a CGT event.


Asset allocation is a skill, and a major determinant of investment returns. Balanced funds have a number of advantages for the average investor, and it is for this reason that these funds contain such a large proportion of investors’ savings – whether they are accessed via compulsory retirement products (like pension, provident, preservation or retirement annuity funds) or via direct discretionary investments.

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