etfSA monthly etf / index tracking unit trust performance survey

The latest Performance Survey highlights the following:

· In the short-term, 1-3 months, resource based tracker funds, such as the Satrix RESI 20, the eRAFI Resources 20 and the NewFunds Shari’ah Top 40 (which has a strong weighting in resources) feature strongly, indicate that sector rotation towards commodities and the recent weakening of the rand are paramount issues in the current investment market.

· The BIPS Inflation-X ETF, which holds a portfolio of inflation-linked bonds has, for the first time in the Survey, outperformed the Investec zGOVI ETF, which holds a portfolio of normal Government bonds. This suggests that in an environment where interest rates are rising, inflation-linked bonds, where the capital value rises with inflation, might be more attractive than traditional bonds, whose capital value falls as interest rates rise.

· The total return performance of ETF funds continues to exceed that of unit trusts, tracking similar indices, which signifies that the lower Total Expense Ratios (TERs) of ETF funds have a positive impact on performance.

1 Year Returns

The Satrix INDI 25 ETF was the best performer over 1 year, with the NewFunds eRAFI Industrial 25 ETF not far behind. Industrial portfolios have performed well over the past 12 months in response to the recovery in the local economy.

The Satrix RESI 20 ETF has crept into the top three, reflecting the upsurge in the resource sector in late-2010.

3 – 5 Year Returns

The Satrix INDI 25 ETF has the best 5 year performance and second best 3 year total return performance of all the index tracker funds. The relative lack of awareness of this Fund is puzzling given its consistently good performance and its exposure to a blue chip portfolio of South Africa’s leading domestic shares.

The full etfSA Performance Survey is attached. The etfSA Performance Survey measures the total return (price changes plus reinvestment of dividends) for index tracking unit trusts and Exchange Traded Funds (ETFs) available to the retail public in South Africa. The performance table (attached) measures the 1 month to 5 years total return compared with the benchmark index returns (including reinvestment of dividends). Note, as the FTSE/JSE calculates the index without taking into account any brokerage or other transaction costs, index tracking products will typically underperform the index because of their transaction and other running costs.