Sygnia shocks with ETF about-face
DB X-TRACKERS: PURCHASE WILL LOWER FEES FOR FUNDS
Sygnia’s CEO, Magda Wierzycka, has always been critical of ETFs’ high fees. So why is the asset manager turning to them after buying Deutsche Bank’s db X-trackers?
Asset management firm Sygnia is getting behind db X-trackers (DBX) exchange-traded funds (ETFs) – a plan that has been in the making for more than a year – through the acquisition of the investment product from Deutsche Group for R325 million.
The deal’s progress, announced on Thursday, will allow Sygnia a foray into the ETF world from its traditional focus on low-cost unit trusts, umbrella and retirement annuity funds.
Multi-asset exposure
DBX is an investment company, which manages index-tracking ETFs that are traded on the JSE and offer exposure to multiple assets classes including equities, commodities, bonds and currencies.
The ETFs track indices – including the Euro Stoxx 50, FTSE 100, MSCI Japan, MSCI USA and MSCI World indices – offering investors the opportunity to invest in offshore markets without physically taking their rands out of SA.
Sygnia’s deal is an antithesis of its CEO Magda Wierzycka’s traditional attitude towards ETFs, criticising them for high administration and asset management fees.
The big question is why has Sygnia changed its position towards ETFs. Wierzycka says the DBX deal is an opportunity to expand the firm’s investment offering beyond unit trusts. “One of our stated intentions is to become the largest provider of index-tracking products in SA. DBX gives us yet another opportunity to shake up the financial services industry by lowering the cost of access to ETFs.”
To lower costs, Sygnia is planning to integrate the db X-trackers ETFs to its existing funds such as its multi-manager and worldwide flexible fund, of which 25% of its R16.9 billion assets under management are invested in offshore index trackers.
“As much as we manage index-tracking funds domestically ourselves, the international products are outsourced to BlackRock. Now we will be able to bring those products in-house and manage them from SA, enabling us to reduce costs.”
Sygnia has ambitions of launching global bond and listed property ETFs and smart beta products.
The db X-trackers ETFs is a coup for Sygnia as the Germany-headquartered Deutsche Bank has been selling its smaller global assets to pay off fines (running into billions) across the US and UK relating to lax money laundering offences, mis-selling mortgage securities before the 2008 credit crisis, rigging of the London Interbank Offered Rate (known as Libor) and hiding tax liabilities.
Critical mass
DBX, which already boasts 30 000 investors, adds R11.3 billion worth of assets under management to Sygnia.
Anthony Clark, an analyst at Vunani Securities, says putting the DBX tracker ETFs on Sygnia’s investment platforms means there will be synergistic cross-selling opportunities across the group. “DBX is the leading ETF traders and Sygnia is one of the leading index tracking funds in SA. Plugging in an additional R11 billion [DBX’s AUM] is good news,” he says.
Now we will be able to bring those products in-house and manage them from SA, enabling us to reduce costs.
Magda Wierzycka Sygnia CEO