Collective Investment Undertakings (“CIU”)
A collective investment undertaking is defined in Section 6 (1) of the Collective Investment Undertakings Act as:
(a) an arrangement the principal object of which is the collective investments of its funds in real or personal property of whatever kind, including securities and other liquid financial assets, with the aim of giving its members, or unit-holders the benefits of the result of the management of its funds and subject to any prescribed exemptions, spreading investment risk; and
(b) Subject to any prescribed exemptions the units of which are, at the request of holders, purchased, directly or indirectly, out of those undertakings assets.
The assets of a unit trust fund are managed by a Management Company (“Manco”) approved by NBFIRA, the Manco appoints a trustee who safe guards the assets of the unit trust fund. The documents needed for establishment of a CIU, are inter alia, the fund prospectus, trust deed, supplemental trust deeds where necessary and any other contract entered into between the fund, the Manco and third parties.
Apart from the CIU setup described above, there are other forms of undertakings which are meant solely for professional investors, e.g. private equity funds, venture capital funds, mezzanine fund etc. These undertakings are subjected to minimal supervision as professional investors are expected to do thorough research and due diligence on these funds before they invest with them, hence, they are exempt from rigorous regulation and supervision.
Foreign funds may be marketed in Botswana only if authorized to do so by the Regulatory Authority. As at March 2011, there were 60 foreign funds being marketed in Botswana, a two-fold increase from the number of international funds sold locally in the previous year. The four principal and authorized sellers of foreign funds are: Orbis Investment Management Limited (Bermuda), Allan Gray Unit Trust Management Limited (RSA), State Street Bank Luxembourg S.A and Ashburton Replica Portfolio. A number of local investment companies serve as facilities agents for these foreign funds.
Currently, NBFIRA supervises 6 locally incorporated and authorized investment funds, which consists of 23 unit portfolios of which 7 are dormant. Of the 16 unit portfolios operational, 4 are money market funds, 5 are equity funds, 4 are asset allocation/balanced funds and 3 invest predominantly in fixed income instruments (bonds).