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Intellidex 2019 reviews: NewFunds MAPPS Protect ETF

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Catch this insight by Intellidex on the NewFunds MAPPS Protect ETF. The NewFunds MAPPS Protect ETF mimics the total return performance of South African equities and fixed income indices through the MAPPS Protect Index. The ETF suits a risk-intolerant investor. Its high weightings low-risk bonds and cash help  moderate its volatility.

Intellidex Insight: The NewFunds MAPPS Protect ETF is one of the two JSE-listed funds that invests across asset classes – equities, fixed income and cash – to create a balanced portfolio. The NewFunds MAPPS Protect ETFs fund has 38.66% of its assets in equities through the JSE Swix Top 40 index, 49.62% in bonds and 11.72% in cash.

By investing across multiple asset classes that are not perfectly correlated, the NewFunds MAPPS Protect ETF is able to reap the benefits of diversification which most single-asset class funds are unable to do. Its asset class diversification enables it to absorb unanticipated shocks that may be specific to a particular asset class. Notably though, this benefit usually comes at a sacrifice of upside potential as multi-asset funds tend to have lower upside potential when compared to funds focusing on equities only.

First-time investors who are warming up to ETFs and risk-averse investors are likely to find this fund interesting. It is also compliant with regulation 28, legislation that stipulates the asset allocation limits of retirement funds, which means one can use it as a retirement investment for the tax benefits.

Fund description: The NewFunds MAPPS Protect ETF mimics the total return performance of South African equities and fixed income indices through the MAPPS Protect Index, which invests in equities through the JSE Swix 40 Index, nominal bonds through the GOVI Index, inflation-linked bonds through the ILBI Index and cash in allowable money market instruments.

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NewFunds Protect ETF

EQU.ZA.MAPPSP

Top Holdings: The top 10 constituents contribute 48.3% to the fund portfolio. Eight of the top 10 holdings are bonds, which reflects the fund’s conservative investment approach.

NewFunds Mapps Protects Top 10 Holdings

Suitability: The ETF suits a risk-intolerant investor. Its high weightings low-risk bonds and cash help moderate its volatility.

Historical performance: The NewFunds MAPPS Protect ETF’s returns lag those of the JSE All Share and All Bond indices

NewFunds MAPPS Protect Historical Performance

Fundamentals: The ETF has more than 50% of its funds invested in fixed income instruments. This asset class is particularly sensitive to interest rates but is also affected by macroeconomic risks, political risks and bond-yield movements.

Recent economic data on the domestic economy reinforces how gloomy the underlying economic condition is and investor sentiment remains fragile. In the third quarter of 2019, the issuing of unsecured, short-term debt instruments from big corporations was limited, with most issuance coming from banks.

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NewFunds Protect ETF

EQU.ZA.MAPPSP

The tough economic conditions leave little revenue growth potential for South African companies. Offshore investors have generally been sellers, putting more pressure on the share prices of local stocks. On the global front, there is some positive sentiment emanating from consumer prices rebounding in the US and more stimulus measures expected to boost the slowing Chinese economy.

Fund statistics:

MAPPS Protect Fund Statistics

Alternatives: The NewFunds MAPPS Growth ETF is the only other fund that invests across multiple asset classes. It is more aggressive than the Protect fund with 74.3% of its assets in equities.

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NewFunds MAPPS Protect ETF Fact Sheet

MAPPS Protect Factsheet

Background: Exchange-traded funds (ETFs)

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 numerous companies in a single transaction. ETFs can be traded through your broker in the same way as shares, say, on the Easy Equities platform. In addition, they qualify 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 or bonds 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

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