Another fund for SA investors to capitalise on megatrends – Satrix launches its 26th ETF – News24

Written by Amanda

Satrix’s head of portfolio solutions, Nico Katzke, says the company is proving that it’s not a passive manager.

  • Satrix has launched its 26th ETF, the Satrix Smart City Infrastructure Feeder Fund.
  • The company wants to capitalise on megatrends that are at play globally, but at a lower cost than its active investment counterparts.
  • Most of the growth in Satrix has been coming from ETFs lately, as the company responds to investors’ demands with different offerings.

The world of indexation has taken another step away from passive investing as South Africa’s largest unit trust provider, Satrix, launched its 26th exchange-traded fund (ETF), the Satrix Smart City Infrastructure Feeder ETF, on Monday.

Although the IPO went on 28 June, Satrix will list it on 26 July.  

It’s based on BlackRock iShares’ Smart City Infrastructure UCITS ETF, which invests in global companies that provide services for developing and efficiently running Smart City infrastructure. The company launched another infrastructure ETF that will give local investors global exposure in August 2021. But the latest is aimed at capitalising on megatrends at play across the globe.

“The Satrix megatrends strategy aims to make global investment megatrends accessible to South African investors through cost-effective, efficient index exposure to appropriate segments of the offshore market,” said the investment house’s quantitative portfolio manager, Siyabulela Nomoyi.

Index tracking funds like Satrix and BlackRock are going big on investing in megatrends like technology, demographics and sustainability – on which many active managers have also been focusing. They’ve moved away from simply tracking the index, or what Satrix calls “vanilla indexation”.

“[Given] what an index provider like Satrix brings to the market, we are not a passive manager,” said Satrix’s head of portfolio solutions, Nico Katzke.

The new ETF is trying to capitalise on the growing investor appetite to back stocks that will benefit from the emergence of smart cities as rapid urbanisation around the world intersects with climate change worries.

It will give South African investors exposure to stocks like China Tower Corp, the US’s Cisco Systems, Motorola Solutions, Nokia and all the other companies on the STOXX Global Smart City Infrastructure Index, which has a minimum of 80 stocks. Some of the companies there aren’t household names, but they are all beneficiaries of rapid urbanisation.

Three-quarters of these companies are in developed countries like the US, Canada, Japan and Finland. And the emerging markets the index invests in are fast-growing economies like China, Hong Kong, Taiwan and Mexico.

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Given the fact that the National Treasury has opened the gate a little wider, allowing locals to take up to 45% of the money offshore, Satrix hopes that it will draw both those looking to take advantage of this opportunity as well as investors looking to go more the sustainable investment route. 

The company hasn’t seen “money fly out the door” yet – it reckons more investors are looking for “easier” ways to take their money offshore than to set up foreign bank accounts. And this ETF, given its low-cost structure relative to what active managers offer with their global funds, might just be an easy route that appeals to more people.

The rise of indexation

Passive investments and index-tracking funds only started gaining popularity in SA recently. But the money flowing to these funds is still much lower than in developed markets. Roughly 6% to 7% of assets under management (AUM) in SA are invested in index-tracking funds. In Europe, about 20% of AUM is in indexation.

In the US, where two of the world’s biggest providers of ETFs, BlackRock and Vanguard, are based, money going to passively-managed funds has already overtaken active funds. More than 54% of the US domestic equity AUM now sits in passives.

But while their share of the market is still tiny in SA, Satrix says it has started growing noticeably, with a particular interest in ETFs. Satrix alone has R160 billion in AUM, 25% of which belongs to Sanlam. And 60% of its clients are now institutional investors like pension funds.

READ | Sygnia posts record half-year performance, thanks to the popularity of its funds and ETFs

“A lot of the growth that we have seen in the business has been very much in that ETF space … It is a very accessible vehicle for people. We’ve also had very good partnerships enabling us to grow that side of the business. That’s why it has become very popular,” said Satrix’s CFO, Rick Martin.

Satrix was the first provider of ETFs in SA. It later partnered with EasyEquities in 2015, allowing people to invest from as little as R5. That partnership has not only won it two awards but also a bigger share of the retail investors market.

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Source: news24.com

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Hi there, I am Amanda and I work as an editor at impactinvesting.ai;  if you are interested in my services, please reach me at amanda.impactinvesting.ai