Unit trust companies and fund of funds companies in South Africa and worldwide have fund fact sheets which contain information in a nutshell and is user friendly and usually on one A4 page.

Our fund fact sheets contain the minimum amount of information that the marketer will have to explain and hand over to a prospect so as to be FAIS compliant.

Each paragraph of the fund fact sheet is intended more to sell the product than to be of an academic nature, and the paragraphs are numbered in a logical order in which the facts should be explained to a client.  These paragraphs do not necessarily follow one after the other because of the compact nature of the fund fact sheet.  To make the communication function even easier we have included paragraph 8, Monthly Performance, as well as paragraph 6, in the case of Kanaan Flexible and Kanaan Balanced Wrap Funds Ranking them against all South African FoFs (The FoF’s are not allowed to show their ranking, therefore if you want to see the long term rankings of the Fund of Funds, you should look at paragraph 6 of the wrap funds).

The fund fact sheet should thus be explained, especially to a new client, as follows:

  1. Investment objectives:

    This is static information concerning the objective of the fund.  The fund manager is not allowed to change the objective or the mandate of the fund once it’s been specified. A fund manager may for instance not change from a flexible managed mandate to an extremely prudential mandate, or to a sector specific objective and in so doing become a specialist FoF, investing only for instance in the financial services sector.  Any unit trust fund manager who deviates from his objective or mandate can have a sudden and dramatic change in his long term performance and standard deviation, positively or negatively,  which will be grossly unfair towards the broker and his client who might have been misled by a manager’s previous performance record.

  2. Manager’s Comment:

    The review reflects, in a nutshell, the performance of a fund for the past month compared to its benchmark.  The outlook is usually a summary of the fund manager’s monthly view on the market and a forecast for the coming month or quarter.  A more detailed outlook or newsletter is available to the broker or his/her client on the website.

  3. Risk Measures:

    Paragraph 7, does not follow after paragraph 6 on the fact sheet, because of space, but is a logical mathematical explanation of the price movement of the Kanaan funds which should be explained after the graphic performance has been shown to the client.

    The downside deviation in the case of the Kanaan funds are interestingly less than the upside deviation because of our successful Macro “top down” risk management methodology.

  4. Competitive advantage:

    Information explaining the competitive advantage of this fund over the other ±670 funds in SA.  The latter part of this paragraph explains that we switched timeously to cash before market crashes of 1987, 1998 and 2000.

  5. Market Niche:

    This is an extension of the previous paragraph and intends to further drive home the point of successful fund management if the previous paragraph has not done so already.

  6. Ranked against all SA FoF’s:

    The Kanaan wrap funds have outperformed its benchmark consistently over the past 10 years.  This paragraph starting with the 3 year performance benchmark compares the Kanaan funds to more than 200 FoFs in South Africa.  Visit our website for more information on history and  track record. Rankings are not allowed on unit trust FoF fact sheets as in the case of wrap funds, therefore Kanaan maintain its wrap funds, which are the predecessors of the FoF's.

  7. Performance since inception: (the graphic analysis compared to the benchmark).

    It shows the amount the first client invested at date of inception and how  the value of that investment has grown, representing an annual  net of cost return of a certain percentage, as shown.

    The price movement is  graphically illustrated and compared to the benchmark, the JSE. (“The annualized net of cost return since inception” means the average return, after the costs has been deducted - excluding the initial fee and LISP fees in the case of the wrap funds).  The graphic analysis in the case of the wrap funds, also shows how the share market collapsed during the Far East Pacific crash, the March 2000 IT bubble crash and the 2002 Rand crash, where under these circumstances  Kanaan switched timeously to the Money Market.

  8. Monthly performance:

    Not all the fact sheets in South Africa show the monthly performance since inception but Kanaan is transparent in this regard. The client or prospect can see exactly what the monthly performance was (net of cost) as well as year to date (YTD) performance. The client could easily assess from this information whether the volatility of the fund is acceptable to him/her or not.

  9. Asset allocation:

    Shows the sectors where the fund is currently invested.  The specific unit trusts in which Kanaan is invested is, unfortunately, privileged information.

  10. Portfolio information:

    Contains fees and other technical information concerning the funds, which are not allowed to be changed.

  11. How to invest:

    Shows members of the public and the broker community who visit our website, how to invest. When an investor invests directly in Kanaan funds, or any other unit trust for that matter,  he saves the up-front fees of the broker and the LISP as well as the trail fee (in most cases, 1%) of  the broker and  the LISP.

    Dangerous for public to work without a broker:

    Kanaan has been managing funds now for more that 10 years and has seen and heard many times over how clients have invested their capital in the Kanaan funds at a high and a few months later when the market went down, (for instance during the Iraqi war in 2003), they tend to become nervous and want to withdraw their money.  Mostly clients without brokers act in this manner.  The next month, May 2003, the Kanaan funds performed at 10.27% and ended the year 2003 with an average return of 20.49%.  Most members of the public get nervous very easily when they see a correction in the market. They visit our website, find it very attractive and invest when the market is at a high, but when there is a normal correction in the market (which can sometimes be quite severe) they get cold feet and withdraw their money and thereby eventually lose money.  The money they lose under these circumstances is only a small portion of their bad luck.  Such clients become totally risk averse and thereafter only invest in the Money Market where they usually get a rate of return, after tax, which is less than inflation; or in a guaranteed plan where they can easily receive less than what they could have received by investing  in the Money Market.

    Kanaan  - witness to the advantages of intermediary services:

    Kanaan fund managers are witnesses to the fact that most brokers are in a position to offer clients a better product suitable to their needs than that which they would have been able to do themselves, and most important,  brokers usually protect their clients against themselves during periods of market volatility.   

  12. Website:

    Brokers and clients who are more academically inclined can find more detail on our funds, on the website.  As far as paragraph 6, Performance since inception (1 October 1996),  is concerned,  they can visit the website and get  more information under the heading “History and Performance Record”.

  13. We trust that you will find this explanation on the fund fact sheets helpful so as to assist you in explaining the fund fact sheet properly to your client or prospect.

    Kanaan Trust see themselves in a joint venture with Financial Advisors in a win-win situation where we have given brokers, over the years, a winning product which has helped them revive their production from moderate to far above average.