We’ve been witnessing a steady revolution in the South Africa investment s pace over t he last decade or so, and, in many ways, we can point back to the launch of the Satrix40 exchange-traded fund (ETF), which listed in November 2000, as the start of the revolution. This ETF offered two critical components: low cost and market trackers – both new for local investors. The markettracker issue is huge as the majority of general equity funds underperform the market due to costs and it is perhaps the cost side that is even more important.
Thirteen years ago when the Satrix ETF listed, brokerage fees were unlikely to be lower than 1% at best; we now have even the most expensive online broker offering rates below 1% and the cheapest at 0.4%. Unit trusts, which are what the ETF market is squarely aiming at, have also been slashing costs, although they remain more expensive than ETFs due to their funds being managed by expensive professionals who mostly do not beat the market. The other big story back in the early years of the new millennium was the cost of retirement annuities (RAs), which we discovered were charging absolutely massive fees and offering very poor performance as a result.