An af­ford­able and easy route: ETFs

While South African in­vestors do not have a wide choice of off­shore ex­change-traded funds, this op­tion is both sim­ple to use and does not re­quire in­vestors to put in huge sums.

Finweek English Edition - - COVER STORY OFFSHORE INVESTING -


in off­shore ex­change-traded funds (ETFs) have not ex­pe­ri­enced ex­cep­tional in­creases in their in­vest­ments over the past year as the strong rand off­set global mar­ket ral­lies, yet off­shore ETFs con­tinue to gain pop­u­lar­ity as a rel­a­tively cheap en­try into global in­vest­ment.

While there are only a hand­ful of op­tions on the JSE, this is set to change this year as sev­eral new list­ings are an­tic­i­pated in the near fu­ture.

The per­for­mance of off­shore ETFs to date has been vari­able, de­pend­ing on the time frame. If you are look­ing at per­for­mance over one and three months, there has been quite a nice come­back, says et­ man­ag­ing di­rec­tor Mike Brown, as there has been a lit­tle rand weak­en­ing on South Africa’s down­grade and im­proved global equity mar­kets.

Over the past year, how­ever, rand strength off­set the ben­e­fits that off­shore ETFs should have got from global equity mar­kets when they were at an all­time high. But the fur­ther back you go, Brown says, the rand has de­pre­ci­ated 9% per an­num against the dol­lar, and one of the best ways to lock in rand hedge ex­po­sure is to in­vest in a global in­dex. “Of course, it all de­pends on your tim­ing, but there is none­the­less a case to be made for a cer­tain por­tion of your in­vest­ment to be ex­posed in­ter­na­tion­ally through ETFs.” At the mo­ment, in­vestors are not spoilt for choice when it comes to lo­cally listed off­shore ETFs. There are only a hand­ful, with ex­po­sure largely to ma­jor in­dices in ma­jor mar­kets and lit­tle room for spe­cial­i­sa­tion. More op­tions are com­ing soon, says Brown. In the mean­time, off­shore EFTs’ per­for­mances have, in gen­eral, out­stripped the Man­ag­ing di­rec­tor of et­

Mike Brown

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