CoreShares embraces unit trusts

TRACKER FUNDS: RETAIL-FRIENDLY AND SUPER-LOW COSTS BETWEEN 0.2% AND 0.425%

Provider’s new funds are intuitive and easy to understand.

CoreShares is the latest index product provider to add unit trusts to its suite of exchange-traded funds (ETFs). From September 1, four of its strategies will be available to investors in unit trust format.

The four new funds will be the CoreShares S&P SA Dividend Aristocrat Tracker Fund, the CoreShares S&P SA Low Volatility Tracker Fund, the CoreShares S&P SA Top 50 Tracker Fund, and the CoreShares Property Top Ten Tracker Fund. They are all lowcost options, with service fees between 0.2% and 0.425% per annum.

Track record

MD of CoreShares, Gareth Stobie, says the dividend and low volatility strategies have been particularly successful as ETFs, in terms of performance and attracting investment.

“This is because they fulfil a function and are outcomes orientated,” Stobie said. “They are intuitive and easy to understand.

“Just about all financial planners manage their advice practices using linked investment service providers (Lisps), and so it was important for us to engage with this channel in a format which the Lisps could deal with more readily,” Stobie said. “I believe over time Lisps will become more product agnostic, as this has been the trend globally.”

Stobie doesn’t however expect this to impact the demand for the ETF versions of the same strategies.

“Our sense is that ETFs are very retail-friendly,” he said. “They are easily accessible to advances in robo-advice, online platforms like Easy Equities and various other direct channels as they are listed on the exchange and can be bought like any other share. One doesn’t have to go to a management company or a Lisp to get them.”

He also believes that the argument around which structure is more cost-effective – ETFs or unit trusts – is a moot one.

“Unit trusts tend to be more efficient in terms of the upfront investment costs, whilst ETFs tend to have better tracking error and cost management over time,” he argues.

The strategies

In brief, the four indices tracked by these funds work as follows:

S&P SA Dividend Aristocrats This index includes companies with market caps of over $100 million that have increased or maintained their dividend for at least five consecutive years, with an index minimum limit of 20 stocks. All holdings are equally-weighted.

S&P SA Low Volatility Index

This index includes the 40 local stocks with the lowest trailing one-year volatility.

Stocks must have a market cap of at least $100 million, and are weighted by the inverse of their volatility.

S&P SA Top 50 Index An alternative to the FTSE/JSE Top 40, this is a large-cap index that offers a slightly broader market exposure.

Companies are ranked and weighted by their free-float market cap, but no stock can have a weighting of more than 10% in the index.

FTSE/JSE SA Listed Property Top 10 Equal Index

This index covers the ten largest real estate counters on the JSE. The constituents are equally weighted.