Unit trusts and mutual funds are frequently used interchangeably in South Africa. There is no practical or legal difference between the two; both pertain to collective investment plans that are supervised by the Collective Investment plans Control Act (CISCA). In order for unit trusts to function, funds from multiple investors are combined into a single fund and subsequently split up into equal units. A proportionate percentage of the fund’s underlying assets are represented by each unit. These units are available for purchase or sale by investors, and the unit price is determined by dividing the number of units in issue by the current market value of the assets.
Mutual Funds and Unit Trusts: Are They the Same?
In South Africa, the terms mutual funds and unit trusts refer to the same type of investment vehicle. Both are forms of collective investment schemes (CIS) that pool money from multiple investors to invest in a diversified portfolio of assets, including stocks, bonds, and money market instruments. These schemes are regulated under the Collective Investment Schemes Control Act (CISCA), ensuring a standardized and transparent framework for investors.
Structure and Operation
A unit trust operates by pooling funds from various investors into a single fund, which is then divided into equal units. Each unit represents a proportionate share of the fund’s underlying assets. Investors can buy or sell these units, with the unit price reflecting the current market value of the assets divided by the number of units in issue. 
The term mutual fund is more commonly used in the United States and other countries, while unit trust is the preferred term in South Africa and some other Commonwealth nations. Despite the different terminology, the fundamental principles and operations are similar.
Regulatory Framework
In South Africa, both unit trusts (mutual funds) are governed by the Collective Investment Schemes Control Act (CISCA) and regulated by the Financial Sector Conduct Authority (FSCA). This regulatory framework ensures that investment managers and unit trust management companies adhere to strict standards, providing investors with protection and transparency. 
Key Considerations for Investors
When choosing between mutual funds and unit trusts in South Africa, consider the following:
• Investment Objectives: Align your choice with your financial goals, risk tolerance, and investment horizon. 
• Fund Performance: Review historical performance, keeping in mind that past performance does not guarantee future results.
• Fees and Charges: Understand the fee structure, including management fees and any other associated costs.
• Fund Manager’s Expertise: Evaluate the experience and track record of the fund manager. 
• Liquidity: Consider how easily you can buy or sell units and any potential restrictions