How to Read a Fund Fact Sheet: TER, Benchmark and What the Numbers Mean

Every South African unit trust must publish a minimum disclosure document — the fact sheet — updated monthly. It is two pages, it is free, and almost nobody reads past the performance table.

That is unfortunate, because the performance table is the least reliable thing on it.

Start with the costs, because they are the only certainty

Total expense ratio (TER) is the percentage of the fund deducted each year for management and administration. It is charged whether the fund rises or falls.

Transaction costs (TC) are what the fund pays to trade — brokerage, settlement, securities transfer tax. Shown separately because they vary with how much the manager trades.

Total investment charge (TIC) is TER plus TC. This is the number to compare between funds, not the headline management fee, and not the TER alone.

Two things worth knowing. Performance figures on the sheet are shown net of fees, so the return you see already has costs taken out — you are not meant to subtract them again. And the TER is backward-looking, covering a past period, so a fund that has recently changed its fee structure will show the old one for a while.

Costs are the only figure on the sheet you know in advance. Everything else is a description of what already happened.

The benchmark, and why it decides everything else

The benchmark is what the fund measures itself against, and it is the context for every performance number on the page.

Read it carefully, because a flattering benchmark makes an ordinary fund look good. A general equity fund measured against inflation plus a few percent is not being compared with the market it invests in. Ask what the fund actually holds, then ask whether the benchmark reflects that.

Also check the ASISA category — the classification that groups comparable funds. A fund's ranking is only meaningful within its own category, and categories differ substantially in what they are allowed to hold.

Performance, read properly

Annualised is not cumulative. Annualised return is the average yearly rate that would produce the total. A fund showing 60% over five years is showing roughly 10% a year, not 60% a year. The two are often side by side and are easily confused.

Look at the longest period shown, and at calendar years individually if they are given. A strong five-year number can rest almost entirely on one exceptional year.

Check the manager's tenure. A ten-year record belongs to whoever produced it. If the manager changed two years ago, the older figures describe someone else's work.

Look at the worst period, not just the best. Many sheets show the highest and lowest twelve-month returns since launch. The lowest is the more useful number, because it tells you what you would have had to sit through — and whether you would actually have held on.

Holdings and allocation

Top ten holdings tell you what you are really buying. Two funds with different names frequently hold much the same handful of large companies, and if you own both you are less diversified than you think.

Asset allocation shows the split between equities, bonds, property, cash and offshore assets. This drives both the expected return and how much the fund will move. A fund that is 75% equities will fall meaningfully in a bad year; that is the nature of it, not a fault.

Fund size matters at both extremes. Very small funds can be closed or merged. Very large funds can struggle to move in and out of smaller positions without affecting the price — particularly in a market with limited liquidity.

Risk, income and the practical details

The risk profile is a broad descriptor. Where a fact sheet gives standard deviation or maximum drawdown, those are more informative than the words "moderate risk".

Distribution frequency tells you whether income is paid out or reinvested — relevant for tax outside a tax-free or retirement wrapper, and relevant if you need income.

Minimum investment, both lump sum and monthly debit order.

Regulation 28 compliance matters only for retirement money. A fund marked compliant may be held in a retirement annuity or pension fund; one that is not, may not.

The six numbers worth writing down

If you compare funds on a single sheet of paper, use these:

1. Total investment charge — the full cost.
2. The benchmark — and whether it honestly reflects the mandate.
3. Annualised return over the longest period shown, net of fees.
4. The worst twelve-month return since launch.
5. Asset allocation, especially the equity and offshore proportions.
6. Manager tenure.

Anything else is detail. Those six answer what it costs, what it holds, how badly it has behaved, and whether the record belongs to the current manager.

A worked comparison

Two general equity funds, side by side on their fact sheets.

Fund A shows 11.2% annualised over five years, a TER of 1.55% and transaction costs of 0.35%, so a total investment charge of 1.90%. Its benchmark is the local equity index. The manager took over eighteen months ago. Worst twelve months since launch: −24%.

Fund B shows 10.4% annualised over the same five years, a TER of 0.35% and transaction costs of 0.05%, so a TIC of 0.40%. Same benchmark, same manager throughout, worst twelve months −26%.

Fund A looks better, and on the five-year number it was. But the record was built by a different manager, and the fee gap is 1.5 percentage points a year — which the new manager must now overcome every year, indefinitely, before an investor is ahead.

That is the question the fact sheet actually poses: not "which performed better", but "which is likely to, from here, net of what it charges, under the person running it now".

Neither answer is automatic. What is automatic is the 1.5% — it is charged whether the fund beats the benchmark or not.

Where to find them, and how often to look

Every manager publishes fact sheets on its own website, usually under the fund's page, updated within a few weeks of month-end. Your investment platform will also hold them. They are free and require no login.

Monthly is too often. A fact sheet updated monthly invites monthly checking, and monthly checking produces action — switching after a weak quarter is the single most reliable way to lock in the weak quarter. Once or twice a year is enough to confirm that the fund still does what it did when you bought it.

What genuinely warrants attention between reviews is a change, not a number: the manager leaving, the mandate being altered, the fund merging into another, or fees rising. Those arrive as a formal notice from the manager. Read those; skim the rest.

What the fact sheet cannot tell you

It cannot tell you whether the fund will do well. Every number on it describes the past, and the disclaimer saying so is the most accurate sentence on the page.

It also cannot tell you whether the fund suits you. A fund with excellent long-run returns and a 35% worst year is a poor holding for money you need in two years, however good the numbers look. Match the fund to the date you need the money first, and compare funds second.

And it says nothing about your own behaviour, which usually matters more than the choice between two reasonable funds — see rand-cost averaging explained and index tracking vs active management.

Frequently asked questions

Is a lower TER always better?

Between two funds doing the same thing, generally yes, because the cost is certain and the outperformance is not. Between funds doing genuinely different things it is not a like-for-like comparison.

Do I subtract the TER from the returns shown?

No. Performance on a fact sheet is already net of fees. Subtracting again double-counts the cost.

Why do two funds with the same name perform differently?

Usually different fee classes of the same fund. Class A and Class B may hold identical assets and charge different fees, which is exactly why the TIC is the comparison figure.