The range of index-tracking investments continues to expand, and Satrix recently launched two exchange traded funds (ETFs), one investing in property and the other in inflation-linked bonds.
There are now 52 ETFs listed on the JSE, with a market capitalisation of R69.9 billion, according to a media release from the JSE.
ETFs are low-cost funds that passively follow the shares or bonds in an index, and they are listed on the JSE.
Satrix was the first company, 17 years ago, to launch an ETF in South Africa tracking the top 40 shares on the JSE. It now has a range of ETFs and unit trusts, as well as two balanced, or multi-asset, funds where the asset classes are made up of index-tracking portfolios.
The new Satrix Property ETF tracks the performance of the Standard & Poor’s (S&P) SA Composite Property Capped Index, which invests in all the companies represented in the S&P SA Composite Index that are classified as property companies.
The index includes 15 companies, with three-quarters of the index weight assigned to property companies operating in South Africa, while the rest are domiciled in the United Kingdom.
The weightings of the shares in the index are capped at 10 percent, which means that if any share’s weight in the ETF exceeds 10 percent when the fund is rebalanced, its weighting is reduced to a maximum of 10 percent.
Helena Conradie, the chief executive of Satrix, said in a media release that “different asset classes tend to behave differently under different economic conditions, and investing in a mix of asset classes is one of the chief means of reducing risk and volatility. We wanted to provide this to investors.
“South African listed property has offered an attractive yield and strong capital appreciation over the long term,” she says.
There are four other property ETFs, three from CoreShares and one from Stanlib.
One of the CoreShares ETFs, which was launched late last year, tracks the S&P Global Property 40 Index. The other two track the local listed property sector.
The CoreShares PropTrax SAPY tracks the FTSE/JSE Listed Property Index, a market-weighted index.
The CoreShares Proptrax Ten tracks the FTSE/JSE SA Listed Property Top 10 Equal Index, which equally weights (10 percent each) the top 10 shares by market capitalisation. CoreShares also offers this fund as a unit trust index-tracking fund.
The PropTrax SAPY has returned 16.4 percent a year over five years to the end of December, while the PropTrax 10 has returned 18 percent a year to the end of December, according to a survey of ETFs by etfSA.
Stanlib’s Property ETF, which has a shorter return history, also tracks the FTSE/JSE Listed Property Index.
There are also three index-tracking property unit trust funds, two of which offered by Satrix and Sygnia track the FTSE/JSE Listed Property Index.
One of them, the Prudential Enhanced SA Property Tracker Fund, has a five-year history to the end of December and an annual return over this period of 17.56 percent.
The second new fund that Satrix has launched is the Satrix ILBI ETF, which tracks an inflation-linked bond index, the S&P South Africa Sovereign Inflation-linked Bond 1+ Year Index. Inflation-linked bonds are designed to help protect investors from the negative impact of inflation by linking the bond’s principal and interest payments to inflation.
Conradie says the index has provided strong risk-adjusted returns relative to traditional South African asset classes over the past 10 years.
There is currently only one other inflation-linked bond ETF, according to the etfSA survey. That fund, the NewFunds ILBI (Inflation-linked), has a three-year return of 6.59 percent a year to the end of December.
In November last year, CoreShares also launched a ETF that offers you exposure to offshore markets. The CoreShares S&P 500 Index tracks the S&P 500 index, which represents the shares of the top 500 companies in leading industries in the United States.