Research Portal

Initial public offer: Satrix S&P 500 ETF


Satrix, the first provider of ETFs in SA, has recently launched three new ETFs. The initial public offers for these closed yesterday, but they will list on the JSE next week and anyone will be able to buy them. In this note we examine the third of the offerings, having covered the first two, the Satrix MSCI World ETF and the Satrix MSCI Emerging Markets ETF, in our previous two notes.

The Satrix S&P 500 brings the number of domestically listed, US-focused ETFs to three. The others are Sygnia’s DBX MSCI USA ET and Grindrod’s Coreshares S&P 500. Satrix is trying to differentiate itself by offering investors much cheaper exposure to the US market. The Satrix S&P 500 ETF is targeting a total expense ratio (TER) of 0.25% which, if it manages to achieve that, will be a fraction of its competitors’ costs. That could make a significant difference in terms of the returns investor will get over time.


If you have a portfolio with a heavy concentration of local stocks but want to add global exposure, the Satrix S&P 500 is worth considering. While it tracks companies listed in the US, the S&P 500 has good exposure to the global economy as many of its companies are multinationals. Given that all the underlying stocks will be denominated in dollars, the ETF can also be used by investors who just want to cushion their investments against the prospect of a weakening rand.

What it does

The ETF tracks the price and yield performance of the S&P 500 index by holding a portfolio of securities in the same proportion as the basket of securities that make up the index. Because the index is weighted by market capitalisation, higher-value companies take up bigger weightings and lower-value companies take up smaller positions.


Although invested offshore, the ETF is considered a local asset, which means investing in it will not affect your offshore asset allocation limit of R10m per year.

Top holdings

The S&P 500 is well diversified. The top 10 holdings make up only 19% of the overall portfolio with the biggest asset, Apple, constituting 3.87%. However, the index does have a bias towards information technology companies, which account for 23% of it.



This is a 100% investment in equities, which is a riskier asset class than bonds or cash, but the returns over time should compensate for volatility. An investment in this ETF should therefore form part of a more diversified long-term portfolio.


The Satrix S&P 500 is expected to have a total expense ratio of 0.25%. This will not only be the cheapest foreign ETF on the JSE but will be highly competitive even with those that invest locally. The TER for local ETFs averages 0.3%, with the Satrix Top 40 ETF having a TER of 0.38%.


Historical performance

Since the other ETF that tracks the S&P 500 index is also relatively new, we are going to use DBX Tracker MSCI USA as a proxy for this ETF.

The graph shows that the DBX Tracker MSCI USA fund has been one of the best-performing ETFs on the bourse over the long term. That performance has been boosted by the weakening of the rand against the dollar.

Fundamental view

The returns from this ETF depend on two key factors: the performance of the US companies’ shares and the rand/dollar exchange rate. While not robust, the US economic outlook is reasonably healthy, with GDP growth expected to come in this year at 1.8%, so stocks should also be expected to do well. President Donald Trump has vowed to rebuild the nation's roads, bridges, airports and railways, and implement tax cuts for individuals and corporations. If he delivers on those promises, US companies are likely to do well during his term in office. However, after struggling to pass a bill to repeal and replace former president Barack Obama’s health care legislation, many pundits doubt Trump’s ability to legislate his ambitions. When Obama tried to implement an infrastructure bill, a Republican congress, with deep-seated dislike for large government spending, fought him at every turn.

The performance of the S&P 500 is not solely driven by what happens in the US. Roughly 44% of its earnings come from Europe, Asia and the Americas. The European Central Bank is considering tapering off its quantitative easing stimulatory policies, indicating progress in getting economic growth entrenched, while in the UK, the Bank of England raised its GDP growth forecast for 2017 to 1.4% from the 0.8% projected after the Brexit referendum.

Spoiling what seems to be a positive outlook for this ETF is the rand – which has been strengthening against the dollar recently, diminishing rand-based returns. However, given the fragile state of the local economy and a weak commodity price outlook, many commentators expect the rand to weaken against the dollar in the medium to long term, particularly as the US increases base interest rates.


As an alternative to this ETF, you may consider the CoreShares S&P 500 ETF and the DBX MSCI USA ETF. There is little difference between all three funds. They track either the MSCI USA or S&P 500 indices. The slight difference is that the MSCI USA includes both large-cap stocks and the many small- and mid-cap stocks left out of the S&P 500. But both are generalist indices and their performance is similar.

BACKGROUND: Exchange Traded Funds

Exchange Traded Funds (ETFs) are passively managed investment funds that track the performance of a basket of pre-determined assets. They are traded the same way as shares and the main difference is that whereas one share gives exposure to one company, an ETF gives exposure to more than one company in a single transaction. ETFs can be traded through your broker the same way as shares, say, on the EasyEquities platform. In addition, it qualifies for the tax-free savings account, where both capital and income gains accumulate tax free.

Benefits of ETFs

  • Gain instant exposure to various underlying shares in one transaction
  • They diversify risk because a single ETF holds various shares
  • They are cost-effective
  • They are liquid – it is usually easy to find a buyer or seller and they trade just like shares
  • High transparency through daily published index constituents


This research report was issued by Intellidex (Pty) Ltd. Intellidex aims to deliver impartial and objective assessments of securities, companies or other subjects. This document is issued for information purposes only and is not an offer to purchase or sell investments or related financial instruments. Individuals should undertake their own analysis and/or seek professional advice based on their specific needs before purchasing or selling investments. The information contained in this report is based on sources that Intellidex believes to be reliable, but Intellidex makes no representations or warranties regarding the completeness, accuracy or reliability of any information, facts, estimates, forecasts or opinions contained in this document. The information, opinions, estimates, assumptions, target prices and forecasts could change at any time without prior notice. Intellidex is under no obligation to inform any recipient of this document of any such changes. Intellidex, its directors, officers, staff, agents or associates shall have no liability for any loss or damage of any nature arising from the use of this document.


The opinions or recommendations contained in this report represent the true views of the analyst(s) responsible for preparing the report. The analyst’s remuneration is not affected by the opinions or recommendations contained in this report, although his/her remuneration may be affected by the overall quality of their research, feedback from clients and the financial performance of Intellidex (Pty) Ltd.

Intellidex staff may hold positions in financial instruments or derivatives thereof which are discussed in this document. Trades by staff are subject to Intellidex’s code of conduct which can be obtained by emailing mail@intellidex.coza.

Intellidex may also have, or be seeking to have, a consulting or other professional relationship with the companies mentioned in this report.