Initial Public Offering opens for new Satrix Momentum ETF

Helena Conradie, CEO, Satrix

Jason Swartz, head of Portfolio Solutions, Satrix

Satrix adds to its smart beta ETF range

The initial public offering (IPO) for the new Satrix Momentum ETF opens on Wednesday, 24 October 2018. This is Satrix’s 15th ETF and the fourth in its smart beta range. The Satrix Momentum ETF tracks the proprietary Satrix Momentum Index, developed in-house by Satrix’s quantitative specialists. The total expense ratio (TER) will be targeted at 0.40% p.a. (incl. VAT). Satrix Momentum joins Satrix Divi Plus, Satrix Rafi 40 and Satrix Quality as part of the Satrix smart beta ETF offering.

“We’ve successfully managed significant institutional mandates against our momentum index since 2008 and launched the unit trust in 2013. This ETF completes the momentum offering across all investment vehicles,” says Satrix CEO Helena Conradie.

Factor investing - capturing momentum

Factors are a stock’s measurable characteristics that may in some way explain future performance. A factor (or smart beta) index is a rules-based construction of stocks that all exhibit particular attributes. Momentum is one such factor.

In basic terms momentum can be defined as a trend, meaning stocks that are performing well are expected to continue to perform well (i.e. the share price is going up), while those that are not performing well are expected to show further declines in their share price.

To capture the momentum investment style and its effect, Satrix has developed the proprietary Satrix Momentum Index. The index aims to capture the return of the equity market enhanced by the momentum risk premium. To do this, they construct a portfolio tilted towards equities which display positive momentum characteristics and away from equities showing negative momentum characteristics. The index is rebalanced eight times a year.

Jason Swartz, head of Portfolio Solutions at Satrix notes, “While the alpha embedded within a momentum strategy is powerful, both the risk management and effective implementation of the strategy is crucial when harnessing this alpha. Momentum strategies can be vulnerable at turning points and generate large volatility, and thus tempering the portfolio with sound risk overlays is critical. When it comes to implementation, we focus on ensuring existing alpha is not eroded through excessive turnover and subsequent fund costs, all the while maintaining a fresh and pure momentum signal in the portfolio.”

The proprietary Satrix Momentum Index currently has 29 constituents, of which the

Top 10 as at 30 September 2018 are shown below:

How has the index performed?

The graph below shows how the Satrix Momentum index performed against broad market indices.

Benefits of taking up the IPO

Investors have the opportunity to be the first to invest in the new ETF in the initial public offering (IPO), which opens on Wednesday, 24 October 2018. Participating in the IPO means you pay no brokerage fees on the initial investment and you’ll participate in the performance of the ETF from the first day it trades on the Johannesburg Stock Exchange.

The anticipated date of listing on the JSE is Friday, 16 November 2018.

How to access the IPO

Satrix’s online platform www.SatrixNOW.co.za has the benefit of no lump sum minimums, and once the fund is listed investors will also be able to set up debit orders. The IPO is also available on other platforms like the Satrix Investment Plan, etfSA, EasyEquities, iTransact, and Standard Bank online, to name a few. If you already have a personal stockbroking account, simply contact your broker to invest.

Visit www.satrix.co.za to read more about the new ETF and the IPO process.