The local unit trust universe is growing by the month. There are currently close to 300 unit trusts to choose from and fund managers are getting more and more adventurous in their offerings to try and stand out from the crowd.

What may look like a mind-boggling degree of choice actually translates into a relatively simple breakdown of different fund types.

An investor can gain international exposure through various local funds that have a degree of offshore exposure. These are listed as foreign, international or worldwide funds. Asset managers are restricted to investing 15% of their assets under management outside SA but individuals can use their individual exchange control or travel allowance to invest directly in a foreign, non-rand denominated unit trust.

The local fund universe is divided into five broad categories and these are split into more detailed sub-categories with specific investment mandates. All domestic funds are required to invest more than three-quarters of their funds in SA assets.

By far the widest range of unit trusts are equity unit trusts. They give an investor more than 75% exposure to the stock market.

General equity unit trusts can invest in a broad range of stocks, while specialist equity funds have a far more targeted investment framework. Both of these unit trust categories are expected to deliver medium- to long-term capital growth.

The number of specialist equity funds has burgeoned during the past few years. There are eight different specialist categories: gold, mining and resource, financial and industrial, financial, index, international, small companies and specific equity funds (a catch-all for anything that doesn't fit anywhere else).

Fund-of-funds invest in the units of other unit trust funds and may not have an exposure of more than 20% to any one fund. They are more costly than directly investing in the underlying unit trusts but offer an investor a broader, carefully picked exposure to a diversified range of unit trusts.

Managed funds offer a balanced or flexible exposure to the different asset classes. They are, in turn, divided into prudential funds, which have to adhere to the Pensions Funds Act prudential guidelines, and flexible funds. A managed fund portfolio manager may invest in the equity, capital, money and property markets.

Fixed interest funds encompass all the interest-bearing financial assets and include bond and income funds.

Bond funds offer a broad exposure to the bond and money market. Income fund managers are subjected to more restrictive investment boundaries. They have to invest in shorter-dated bonds and money market instruments because the aim of the fund is to provide a reasonably steady income stream and total returns in excess of the money market. A priority is placed on capital preservation.

Money market funds do not invest in money market instruments or bonds that have a maturity of more than a year. They offer investors a popular, higher interest rate alternative to traditional bank savings vehicles and are often used to park money for a relatively short time.