Just buying JSE indices through exchange-traded funds (ETFs) or index trackers may be cheaper (as fees are much lower than actively managed funds), but the recent performance of the broader South African market has been mediocre. . The Satrix 40 fund performed 8.77% last year, while the JSE All Share Index (Alsi) rose 2.9%.
The new ETF from Satrix, the country's largest passive management company, offers investors exposure to locally listed stocks, but with skewed exposure to global companies. In recent years, the weight of domestically listed multinational companies has declined, and currently only account for about a quarter of Arsi. This percentage will further decrease in March when all stocks switch to the shareholder-weighted index (SWIX) methodology.
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Read: Selection of JSE indexes
The financial industry (banks and insurance companies) makes up nearly 30% of the top 40, so buying the 'Index' means being heavily influenced by this sector and 'SA Inc' as a whole.
“This exposes these equity indexes to local macroeconomic idiosyncrasies (often referred to as 'SA Inc. factors'),” said Kingsley Williams, chief investment officer at Satrix. Clients may wish to diversify from within their local equity exposure.
“The new ETF has significantly higher Rand hedging characteristics than other broad local stock market indices, providing a potential cushion in the event of local currency depreciation.”
“It also provides a diversified source of income from its constituents, with higher returns coming from offshore markets across a variety of sectors.”
The new Satrix JSE Global Equity ETF Index tracks the recently launched FTSE/JSE Global Investor Index and focuses on the JSE's 50 largest companies (ordered by market capitalization). This more accurately represents the all-stock index that investors may remember from years ago, rather than the index that exists today.
ancestral company
So-called “grandfather” companies are those that moved their major listed companies offshore before October 2011. The Alsi index took into account the global float of these companies. Currently, only locally registered float stocks are used (in other words, only a portion of those companies are counted in the index).
Source: Satrix
The five 'grandfathers' of this new index are AngloGold Ashanti, BHP Group, Investec plc, Mondi plc and Richemont. Together they make up 28% of the Global Investor Index, compared to 17% for Alsi.
Other internally listed stocks, including AB InBev, British American Tobacco, Glencore, Prosus, Reinet and South32, account for nearly 37% of the new index, compared to less than 10% of all stocks. There is.
Together, these companies, which derive a significant portion (in some cases all) of their revenue from offshore, account for 65.1% of the Global Investor Index, compared to just 26.9% for Arshi at the end of January. do not have. This is a material difference.
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weight distribution
It has a 35% weight in resources and a 39% weight in industrials (excluding Naspers and Prosus). “Compared to Arsi, this means a 6% overweight to resources, a 12% overweight to industrials (excluding technology), and is primarily funded by an underweight to financials,” Satrix said. ”
Source: Satrix
The investor document states that backtesting “suggests that the strategy performs best compared to other local equity benchmarks during periods of rand weakness”.
Satrix JSE Global Equity ETF is scheduled to be listed on March 12th and is currently undergoing an initial public offering. The total expense ratio is 0.15%.
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