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Quick Q and A: Unit Trusts vs. Bespoke Portfolios

By beled | September 10, 2013

Q: What are the benefits of a bespoke portfolio?

A bespoke portfolio is a portfolio tailored to your individual needs.  For example, some investors will favour capital growth, whilst others will have a need for income.  Furthermore, each investor has a different appetite for risk.  When you opt for a bespoke portfolio, you can communicate these needs and preferences to your portfolio manager.

This ties in to the next benefit, which is that you are able to develop a personal relationship with your portfolio manager. There are no call centres!

Another very important benefit of the bespoke portfolio is that new cash can be “timed” into the market as appropriate opportunities arise.  Medium-term timing (tactical asset allocation) is a crucial aspect in successful portfolio management.

And finally, bespoke portfolios can be managed both onshore and offshore.

Q:  What are the benefits of a unit trust?

Unit trusts render the investment markets accessible to virtually all investors by lump sum or debit order.   They provide a range of investment options, such as equity or balanced funds.   Unit trusts also offer investors access to a range of reputable fund managers.

On the downside, there are a couple of points to note when investing in Unit Trusts.  Unit Trusts do not provide a timing overlay into the market, although funds can be “averaged” in.  Furthermore, value for money (fees for performance) has to be monitored. Costs can become excessive if there are too many “fund of funds” layers in the offering.

Q: Who should opt for a bespoke portfolio?

High Net Worth Individuals (HNWI’s) with in excess of about R5million to invest should consider a bespoke portfolio.  Investors who want (and can afford) proper personal service and a tailored approach will benefit from this option.

Q: Who should invest in unit trusts?

As mentioned above, Unit Trusts have made the investment markets and competent managers accessible to the general public.  If you do not have sufficient funds to invest in a bespoke portfolio, then Unit Trusts offer an excellent alternative.  Be sure to choose managers with proven track records and robust investment philosophies.


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