December 2016 – etfSA.co.za monthly South African ETF, ETN and Unit Trust passive index tracking performance survey
Mike Brown, Managing Director, etfSA.co.za.
The Performance Survey for the period ended 30 December 2016, is attached. The Survey measures total investment returns for all 71 JSE listed ETFs/ETNs, and 24 index tracking unit trusts for periods of one month to ten years. The summary table of the best performing passive index tracking products is shown below. The total return performance of each Exchange Traded Fund is shown in Section A (pages 3-5); Exchange Traded Notes in section B (pages 5-6); and Index Tracking Unit Trusts in Section C (pages 7-8).
Summary Table
12 month performance
The past year was a disruption from the previous 5 years as the major indices failed to produce strong investment returns. The FTSE/JSE All Share Index, for instance, delivered a total return performance (with dividends reinvested) of 2,40%. The Top 40 Index recorded a negative return of 1,83% for 2016 and industrial shares fared even worse.
The rand’s significant strength against major currencies in 2016, following the sharp depreciation in late 2015, also distorted returns for offshore investments, traditionally a safe haven in uncertain times. In rand terms the MSCI World Index fell by 8,9% in 2016.
The best performing main sectors last year were resources (the FTSE/JSE RESI 10 Index rose by 27,7%) and SA fixed interest bonds (up by 14,4%).
In such conditions, the best performing index tracker funds in 2016 were products which focussed not on market captialisation and high liquidity, but Smart Beta ETFs, which use other risk factors like value, dividends, volatility and fundamental indexation to search for pockets of value. The resurgence of value investments also assisted certain sectors of the active investment management industry.
Has the time for “smart beta” now arrived with the prospect of value based investment strategies outperforming other methods and strategies continuing? This is probably unlikely as value is rapidly eroded as prices of undervalued shares and sectors rise and the market as a whole typically catches up with the value propositions. However, more interest in “smart beta” ETF products and smart index unit trusts will probably also be a consequence of recent strong investment performance.
The best performing smart index products for 2016 are shown in the Table below.
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The etfSA Performance Survey measures the total return (Net Asset Value (NAV to NAV)) changes including reinvestment of dividends) for index tracking unit trusts and Exchange Traded Funds (ETFs) available to the retail public in South Africa. The performance tables measure the 1 month to 10 years total return for a lump sum investment compared with the benchmark index returns (including reinvestment of dividends). All indices are shown in total return format. Note, as the FTSE/JSE calculates the index without taking into account any brokerage or other transaction costs, index tracking products will typically slightly underperform the index because of their transaction and other running costs.
Please Note: future investment performance will not necessarily replicate historic performance data. All data used in the Survey is sourced from Profile Media, who obtain daily data from all index tracker product issuers.
