Standard Bank, STANLIB and Liberty have collaborated to form 1nvest, a specialist index tracking fund provider. Photo: Karen Sandison/African News Agency (ANA)

CAPE TOWN – Standard Bank, STANLIB and Liberty have collaborated to form 1nvest, a specialist index tracking fund provider, the Standard bank Group announced on Tuesday.

Africa’s largest financial services group said 1nvest combined existing index funds, experience and expertise to provide clients with a comprehensive range of 28 index tracing funds across multiple asset classes and geographies.

“Geared specifically to provide simple, transparent and cost-effective passive investment products, 1nvest specialises in index tracking unit trusts and exchange-traded funds,” the group said in a statement.

Index tracking funds do exactly what the name suggests – they track or replicate a particular index, according to Satrix. A tracker fund which uses full physical replication simply holds the same shares that are contained in the index in the same weighting as they appear in the index. 

Index investing or passive investing has seen enormous uptake in more developed markets. According to Moody’s Investor Services, the adoption of passive investing in the US continues unabated with US passive investment funds set to overtake active funds by 2021.

Johann Erasmus, 1nvest executive said while the total amount of money invested in passive funds in South Africa was small compared with managed funds, an increasing number of investors were showing interest in index funds as part of their larger investment portfolios. A big driver of this was the low-cost return, simple and transparent access that these products offer.

Since index funds track market indices and don’t require a portfolio manager to carefully manage asset allocation, the fees are reduced and investment return that closely matches the targeted index is delivered.

Wehmeyer Ferreira, 1nvest executive said: “Over the last year or so, investors have become spoilt for choice as issuers have listed various new exchange traded funds on the Johannesburg Stock Exchange, offering both local and offshore exposure.”

But with a wide variety of options, investors may feel overwhelmed by what is becoming a vast landscape of product offerings. 

1nvest has five broad product ranges that span equities, fixed income, commodities and property asset classes.