New ETFs allow you to invest in emerging, developed markets

SATRIX, the company that launched the first exchange traded funds (ETFs) in South Africa, is launching three global ETFs that enable you to invest in developed and emerging markets.

“We are always looking at ways in which we can expand our offering, and these rand-denominated ETFs allow investors to access global markets with ease, and at a low cost,” says Helena Conradie, the chief executive of Satrix.

South Africa is one of 24 emerging markets, and a further 23 countries are classified as developed markets. By adding exposure to international companies, you diversify your investment portfolio. The three funds are: • Satrix MSCI World ETF. This tracks the performance of the MSCI World Index, which represents large- and mid-cap companies across 23 developed markets.

• Satrix MSCI Emerging Markets ETF. This tracks the performance of the MSCI Emerging Markets Investable Market Index, which represents large-, mid- and smallcap companies across 24 emerging markets.

• Satrix S&P 500 ETF. This tracks the performance of the S&P 500 Index, which is widely regarded as the best single gauge of large-cap equities in the United States. The index comprises 500 of the leading companies in the US market.

Satrix will replicate the indices by investing in funds of the iShares Core Series UCITS ETFs. iShares are a family of ETFs marketed and managed by global asset manager BlackRock.

The investment costs of ETFs are relatively low compared with many actively managed unit trust funds. The targeted total expense ratios of Satrix’s new ETFs range from 0.25% to 0.4% a year.

Because the ETFs are denominated in rands, South African investors will not be subject to any exchange control processes.

However, as with all rand-denominated funds that invest offshore, you are exposed to exchange rate risk. This means that investment performance will be positively affected if the rand weakens against the dollar, and negatively affected if the rand strengthens.

The initial public offering (IPO) of the three ETFs opened yesterday. Investors who take up the IPO will not pay brokerage fees on their initial investment and will participate in the performance of the ETFs from the first day they trade on the JSE. The expected date of listing on the JSE is July 25.