ETF

Finweek English Edition - - INVESTMENT -

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.

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