JSE offers investors more choice with the listing of two Satrix ETFs

Donna Nemer, Director of Capital Markets at the JSE & Helena Conradie, CEO of Satrix.

New ETFs offer investments in listed property and inflation linked bonds.

The Johannesburg Stock Exchange (JSE) has expanded its product offering to investors with the listing of two new Satrix exchange traded funds (ETFs), which offer investors access to the listed property sector, and a basket of inflation-linked bonds.

“We are committed to offering investors choice and these two Satrix ETFs are a continuation of that journey,” says Donna Nemer, Director of Capital Markets at the JSE.

ETFs are investments that track the performance of a group or ‘basket’ of shares, bonds or commodities. The Satrix Top 40, for example, is a single investment giving one exposure to the 40 biggest shares on the JSE. An ETF can be bought or sold on an exchange in the same way as an ordinary share. Offering tax and cost benefits, ETFs also enable an investor to invest in a variety of instruments (for example shares) through buying a single investment product. They are a suitable investment vehicle for those who are new to the world of stock markets but are also used by institutional investors.

On the new ETFs Helena Conradie, CEO of Satrix, says, “Different asset classes tend to behave differently under different economic conditions and investing in a mix of asset classes is one of the chief means of reducing risk and volatility. We wanted to provide this to investors.”

Conradie says there are also asset-specific reasons for the new ETFs.

She clarifies, “South African listed property has offered an attractive yield and strong capital appreciation over the long term. The Satrix Property ETF will track the performance of the S&P SA Composite Property Capped Index, which invests in all companies in the S&P SA Composite Index that are classified as property companies. Currently there are 15 companies included in the index, with three-quarters of the index weight assigned to property companies operating in South Africa, while the rest are domiciled in the United Kingdom, meaning that this index offers exposure to both South African property as well as property in the UK. Importantly, the index is capped at 10 per cent, which means that no single stock weight is more than 10 per cent at each rebalancing date.”

The Satrix ILBI ETF tracks an inflation-linked bond index, the S&P South Africa Sovereign Inflation-linked Bond 1+ Year Index, providing investors with a hedge against inflation. Inflation-linked bonds are designed to help protect investors from the negative impact of inflation by linking the bond’s principal and interest payments to inflation. Conradie says the index has provided strong risk-adjusted returns relative to traditional South African asset classes over the past 10 years.

“We are pleased to license the S&P SA Composite Property Capped Index and S&P South Africa Sovereign Inflation-linked Bond 1+ Year Index to Satrix,” says Zack Bezuidenhoudt, Head of South Africa and Sub-Saharan Africa, S&P Dow Jones Indices. “We continue to develop innovative indices across multiple asset classes to meet the needs of market participants in South Africa.”

The ETF market has seen steady growth globally as well as in South Africa and these two ETF listings bring the total number of ETFs listed on the JSE to 52, with a total market capitalisation of R69.9 billion.

Nemer concludes, “ETFs are well-regulated by both the JSE and the Financial Services Board (FSB) and can be acquired, like any other listed share, through a stockbroker or online trading account. If the investor does not have a broker, ETFs can be obtained through an investment platform which offers a monthly debit order facility.”