Accessible Satrix Top 40 is SA’s preferred index-tracking ETF
● The Satrix Top 40 this year again claimed the award as SA’s favourite index-tracking exchange-traded fund (ETF) at the second annual South African Listed Tracker Awards (Salta) held at the JSE this week.
The fund is known for being easy to understand, easy to access and a good performer, making it the top choice of about 700 investors who voted on Salta’s website over the past month and a half.
The poll was conducted by Refinitiv, one of the sponsors of the awards with ETF investment platform etfSA and data provider ProfileData.
The Satrix 40 fund invests in the top 40 biggest shares on the JSE, weighting them on their market capitalisation, or the value of the number of shares issued multiplied by the share price.
Getting access to the fund is easy on platforms such as Satrix Now, Easy Equities and etfSA, says etfSA MD Mike Brown.
The Satrix 40 ETF has delivered just less than 14% (13.9%) a year since it launched in December 2000 and Brown says many investors voted it their favourite because, they say, it has delivered good returns for them or their parents.
The Salta Awards recognise ETF performance over three and five years. At least four of the awards were claimed by riskier speciality ETFs that track the prices of commodities such as rhodium or palladium, or resources indices.
Investors looking for access to share markets should rather be looking at funds or ETFs that invest in a diverse range of shares, like the Satrix 40 and four other ETFs that track the top 40 index, or a more recently launched ETF that tracks the top 50 shares on the JSE.
The CoreShares Top50, which was awarded the Salta award for raising the most money over the past three years, tracks the S&P SA top 50, which includes the top 40 and 10 mid-cap shares on the JSE, but limits the weighting of any share to 10%.
Chris Rule, head of client and product solutions, at CoreShares, says this limits your risk of being exposed to a high concentration in one share. Currently, for South African investors, this means limiting your exposure to Naspers.
Rule says that when Naspers is doing well on the stock exchange, the CoreShares Top50 will underperform any of the five ETFs that track the Alsi top 40 index. Over longer terms, such as five years, the Top40 and the Top50 indices have performed similarly, he says.
The CoreShares Top50 has returned 7.04% a year over the past three years relative to the all share index’s 6.55% a year and the Top40 index’s 7.07% for the same period, the latest etfSA performance survey to the end of April shows.
Besides delivering good performance, an ETF should deliver returns as close as possible to the index it tracks or have a low tracking error.
The CoreShares Top50 ETF was recognised in the Salta awards in the equity category for its low tracking error over five years. The NewFunds MAPPS Growth ETF claimed this award in the South African non-equity category.
The NewFunds MAPPS Growth ETF is what is known as a balanced ETF, which invests across the asset classes by tracking different indices.
This fund has returned 7.85% a year for investors over the past seven years. It is one of only two balanced or multi-asset ETFs listed in the etfSA performance survey, but there are many more passively managed balanced unit trust funds that can give you exposure to the share market, balanced with the diversification that other asset classes such as bonds and listed property offer.
Brown says the people’s vote reveals that Satrix is the best-known ETF brand, with CoreShares in third place. Between the two are the Sygnia ETFs, which include favoured ones for getting exposure to foreign markets.
This week Sygnia claimed the award for the ETF manager that raised the most investments over three years, and its Itrix MSCI World Index ETF the award for the fund that raised the most capital over the past three years.
Though most ETFs have too short a performance history for the awards to recognise 10-year performance, over this period the Sygnia Itrix MSCI World ETF, which tracks some 1,600 shares, has returned 16.87%, and the regionally focused Sygnia Itrix MSCI US Index ETF, which tracks 624 companies’ shares, has returned 20.01% a year.
A large part of this growth has been driven by technology companies in the index like Apple, Amazon, Facebook and Netflix. Investors have also benefited from the presence of major global brands in the index, such as Avis, Johnson & Johnson and CocaCola, says Siyabulela Nomoyi, head of index management at Sygnia.
Satrix and Stanlib also have MSCI World indices and ETF providers also offer foreign ETFs that track the US’s S&P 500.