Johannesburg - The uptake in exchange-traded funds (ETFs) and other index tracking products has grown at an annual rate of about 10% over the last decade, compared to the 6% of actively managed assets.
This is according to Mike Brown, MD at etfsa.co.za, who said lower investment cost and poor returns from actively managed funds were the main reasons for the rising popularity of ETFs.
The last two years have been good to the industry, with many innovative products coming to market bringing investors a wider choice of options.
Examples of these include the ZGovi ETF from Investec, the X-Tracker range from Deutsche Bank and Old Mutual's global index trackers, which became the first South African fund to list an emerging market tracking index on a US exchange.
The ZGovi from Investec gives investors access to a basket of South African government bonds. Since its listing in October 2008 at 1 000c per unit, the ETF has risen to a high of 1 072c. It is now trading at around 1 035c per unit.
"Michael Keeves and Investec have created a really good product here," said a market commentator. He added that Keeves, the product head, had placed a lot of emphasis on pricing.
Still, the popularity of available products varies. For instance, the average daily trade in the Zgovi was around R3.6m, which pales into significance next to the R67m traded in the NewGold ETF.
The latter received a great deal of attention in 2009, courtesy of gold's record prices. Allowing investors to participate in the rand price of gold, the ETF started the year at 8 040c per unit, moving up to 8 400c.
Tried and trusted steadies
The strong rand didn't help investors in the Deutsche Bank X-Tracker range. These ETFs allow investors to track the MSCI World, Japanese, US and UK indices which allowed for some asset diversification. However, currency effects have had a bad impact on these funds.
They yielded largely negative returns, with the World fund producing -1.8%, the Japanese -13%, the US -1.3% and the UK fund managing a modest 6% profit since the start of the year.
While the US, UK and Japanese funds all averaged around R300 000 worth of daily trade, the most popular of the listings was the DBX World fund which traded nearly R700 000 a day.
Investors in some older stalwarts - Satrix 40 and Satrix RAFI - obtained better results this year.
The Satrix40 tracks a basket made up of the 40 biggest shares on the JSE by market capitalisation. It returned 26% on around R24.5m worth of trade each day.
The Satrix RAFI - which weighs up shares on a fundamental basis as opposed to size - has been a good performer in 2009, returning more than 35%.
The index is made up the top 40 companies by dividends, cash flow, sales and book value. Launched in late 2008, the RAFI has steadily been gaining popularity with South African investors and trades just under R5m a day.
The property index tracker put in a muted performance, returning 3% in a year when property was out of favour.
- Fin24.com