Absa Capital Announces A Significant Drop in Management Fees For Many Of Its Exchange Traded Funds (ETFs)

With effect from 1st February 2012, Absa Capital, who issue the NewFunds range of ETFs, have announced cuts in the management fees for their exchange listed products. The impact will be to significantly reduce the Total Expense Ratios (TERs) of these pro

ETFs, which are passive investment vehicles that reflect the performance of indices, typically compete with other investment products, by providing market related performance, but with relatively low costs. For instance, on average, local ETFs have TERs of 0,57 percent (as at end-September 2011) compared with average TERs of around 1,60 percent for the most popular types of unit trusts.

The announced changes in TERs for the NewFunds products will see such costs falling, on average, to about one-third of previous TERs.

In pursuing a policy of reducing costs for its mainstream ETFs, Absa Capital appears to be seeking some competitive advantage in terms of cost efficiency. These lower ETFs should lead to enhanced performance and improved “tracking error” over time.