New Performance and Risk Rating System for South African Exchange Traded Funds (ETFs)
A specialized service to analyse the performance and risk ratings of ETFs and other index tracking unit trusts relative to other funds in the same category, has been introduced by PlexCrown Fund Ratings (Pty) Limited and etfSA.co.za.
ETFs are collective investment schemes (like unit trusts), but differ from unit trusts by being traded on stockmarkets, which adds liquidity, easy access and transparency to ETFs. Also, because ETFs cannot disguise their cost structures as their price discovery is made on the open market, they have far lower overall costs than unit trusts.
Ryk de Klerk, Director of PlexCrown, comments that
“the PlexCrown Survey and Risk Ratings of South African Unit Trusts is a well established and high regarded service. We have now extended this to ETFs.”
De Klerk adds
“index tracking funds, such as ETFs, are passive investment products and therefore have the mandate of tracking the indices they benchmark as accurately as possible. We can measure and rank this tracking performance and this is what the ETF Survey does. Furthermore, in the case of enhanced index tracking product, where the manager seeks to outperform the relevant stockmarket indices, it is possible to ascribe a risk adjusted rating to the success of managers in providing such outperformance (alpha) without adding significant risk to the investor and this is a further service provided in the ETF Survey”
Mike Brown, Managing Director of etfSA, explains further
“the PlexCrown/etfSA Survey seeks to measure three criteria:
- The total return (performance) of ETFs compared with index tracking unit trusts that benchmark the same index.”
|
Total Returns (for period ended September 2009) (income reinvested) |
||||
|
Fund |
ETF/Unit Trust |
5 Years |
3 Years |
1 Year |
|
FTSE/JSE Top 40 Index (benchmark) |
- |
18,76% |
5,64% |
5,39% |
|
Satrix 40 |
ETF |
18,40% |
5,41% |
6,80% |
|
RMB Top 40 |
Unit Trust |
17,56% |
4,44% |
6,62% |
|
Stanlib ALSI 40 |
Unit Trust |
18,13% |
5,68% |
7,68% |
|
Kagiso Top 40 |
Unit Trust |
17,95% |
4,91% |
4,62% |
|
Old Mutual Top 40 |
Unit Trust |
16,90% |
3,96% |
6,40% |
“The Satrix 40 ETF has not only closely tracked the Top 40 index, but it also has managed to outperform (in total returns) other index tracking unit trusts over the 1-5 year periods measured.”
- “The PlexCrown/etfSA ETF Survey also specifically measures and ranks the tracking error of the products relative to the index they track. The tracking error measures the extent to which the index tracking products deliver the total return of the indices they track.
In this respect, the Survey finds that the Kagiso 40 Tracker Fund has the lowest tracking error followed by Satrix 40.
- When the ETF or unit trust manager seeks to add outperformance (alpha) to the index, so-called enhanced tracker funds, PlexCrown is able to analyse the funds on a risk-adjusted return basis using traditional measures for this purpose. In this category, the Satrix DIVI ETF has performed admirably by topping the Risk Rankings categories for 6, 12 and 18 months period measured.”
| RISK ADJUSTED RANKING: 18 Months to 30 September 2009 | |||||||
| ETF/UT | Risk Management Tool | Tracking Error | |||||
| Sharpe | Sortino | Alpha | Treynor | Omega | |||
| Satrix DIVI Plus Portfolio A | ETF | 1 | 1 | 1 | 1 | 1 | 1 |
| Old Mutual RAFI 40 Tracker Fund A | UT | 2 | 2 | 2 | 3 | 3 | 3 |
| Plexus RAFI Enhanced SA Strategy Fund | UT | 3 | 3 | 3 | 2 | 2 | 2 |
| Satrix SWIX TOP 40 Portfolio A | ETF | 4 | 4 | 4 | 4 | 4 | 4 |
De Klerk comments that “the joint venture between PlexCrown and etfSA to establish an independent performance and risk measurement service for ETFs (and comparable unit trusts) in South Africa, is designed to act as a tool to assist investors, institutional managers and Financial Advisors to pick the most efficient and rewarding investment products. We intend adding to and developing the ETF Survey as the ETF industry grows in South Africa.”
BACKGROUND
The PlexCrown/etfSA ETF Survey will be published quarterly and will be available to investors on the etfSA website (http://www.etfsa.co.za/) and PlexCrown website (http://www.plexcrown.co.za/). For investors seeking more detail or specific analysis on individual or all ETF products, PlexCrown offers a comprehensive risk analysis, fund profile and ratings service and can be contacted through their website.
PlexCrown Fund Ratings (Pty) Limited is owned jointly by the Plexus Group of companies and Ryk de Klerk, who has 25 years of experience in investment research and portfolio management.
etfSA is a new company established by Mike Brown, who helped set up and establish the Satrix ETF business between 2000-2009. The business of etfSA is to provide a bespoke website dedicated to ETFs in South Africa. The etfSA website provides, information, statistics, tracking data, product profiles and news on all local ETFs. It also offers the only platform which will enable investors, both large and small to transact in any SA listed ETFs, with full administration support and reporting systems. The etfSA investor platform is designed to cater for both do-it-yourself investors, as well as investment professionals and registered financial service providers.
For more information, please contact:
|
Ryk de Klerk |
Telephone: Cell: Email: |
021 976 8591 076 977 7512 |
|
Mike Brown |
Telephone: Cell: Email: |
011 561 6653 082-653-5645 |
