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.
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 etfSA.co.za 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 etfSA.co.za