Exchange traded funds (ETFs), index-tracking collective investments that are designed to be traded on the stock exchange, offer a diversity of investments that was not available when they were launched in this country 17 years ago.
Satrix, the pioneer of ETFs in South Africa, is adding two new non-equity ETFs to its retail ETF offering that has, until now, consisted solely of equity-based funds. The two new products are the Satrix Property ETF and the Satrix ILB (inflation-linked bond) ETF, and they are expected to be listed on the JSE on February 24.
Satrix Property ETF. This will track the S&P SA Composite Property Capped Index, which is made up of all companies in the S&P SA Composite Index that are classified as property companies. Satrix says this is a market capitalisation-weighted index, which means exposure to these companies is proportionate to their size in terms of share price multiplied by the number of shares in issue. However, no single property share may represent more than 10 percent of the index. The constituent companies invest either in physical real estate or in companies that derive more than 60 percent of their revenue from activities related to real estate. Three-quarters of the companies operate in South Africa and the rest in the United Kingdom, making this index attractive to investors wanting exposure to South African property shares, as well as shares domiciled in the UK.
Satrix ILB ETF. This will track the S&P South Africa Sovereign Inflation-linked Bond 1+ Year Index, which is a market-value weighted index reflecting the performance of South African inflation-linked government bonds. The constituents must have a minimum outstanding debt of R1 billion and a maturity greater than one year. The index has provided strong risk-adjusted returns relative to traditional local asset classes over the past 10 years, Satrix says, and the ETF is designed to help protect you from the negative effects of inflation.
Other managers offer ETFs that track the indices of assets other than equities. Property-linked ETFs on the etfSA online platform include the Coreshare Proptrax Ten and Proptrax SAPY ETFs, Coreshares Global Property ETF and Stanlib SA Property ETF. On the inflation-linked bond front, there is the NewFunds ILBI ETF.
Other ETFs available to local investors include Deutsche Bank’s dbx range, which track various overseas markets, and ETFs from Absa and Standard Bank that track the prices of various precious metals.