Catch this insight by Intellidex on the Sygnia Itrix Eurostoxx 50 ETF. The Sygnia/Itrix Eurostoxx 50 ETF is the only ETF on the JSE which offers easy access to 50 blue chip companies on various eurozone stock exchanges. This ETF is suitable for investors with long investment horizons who can stomach higher short-term volatility, compared with other asset classes like bonds and cash.
Intellidex insight: The Sygnia/Itrix Eurostoxx 50 ETF is the only ETF on the JSE Which offers easy access to 50 blue chip companies on various eurozone stock exchanges, with a combined freefloat capitalisation of about €2.5trn, through one investment at a low cost.
An integral aspect of ETFs holding international assets is two return components: asset price return and foreign exchange movements. The underlying assets of the Euro Stoxx fund are denoted in euros, so any rand weakness adds a layer of foreignexchange return. Specifically, since the Sygnia Itrix Euro Stoxx 50 ETF listed on the JSE in 2005, the bulk of its return has emanated from the depreciation of the rand against the euro – about 86%. Therefore, the fund is a great way to hedge against rand weakness. Similarly, the fund hedges against the South African economy and enhances geographical diversification.
The fund’s total expense ratio (TER) has remained the same as three years ago when Sygnia took it over from Deutsche, despite promises to lower it. Sygnia has introduced a sliding fee structure based on the amount invested, with the best TER of 0.4% for an investment of at least R100m. But this is not helpful to retail investors who invest small amounts and have to hand over 0.86% of their investment in fees.
Investing in this ETF does not affect any exchange control limits as it is rand-settled
Fund description:The ETF tracks the price and yield performance of the Euro Stoxx 50® Index and pays dividends in June and December.
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Sygnia Itrix S&P Eurostoxx 50 ETF
Top holdings: Some of the prominent companies in the fund include Total, Louis Vuitton, Ab Inbev and Unilever, with the biggest holding, SAP, occupying only 5% of
the fund. This reflects good diversification.
Suitability:We believe the fund is suitable for investors with long investment horizons who can stomach higher short-term volatility, compared with other asset classes like bonds and cash. The fund can be used as part of a core strategic allocation in your portfolio.
It is impressive the fund tracks its benchmark with such high precision. It is clear the last 12 months have produced impressive returns. While the bulk of the previous 12 months’ returns were due to strong price movements of the underlying euro index, over longer periods the fund has derived most of the value from the rand weakening against the euro.
Fundamentals: European stocks have become one of the most unloved asset classes for well-documented reasons, not least because of Brexit uncertainty and the tariff trade wars. The eurozone economy has struggled in the last few years from weak consumer demand.
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Sygnia Itrix S&P Eurostoxx 50 ETF
In a bid to spruce up the eurozone, the European Central Bank (ECB) has engaged in various expansionary monetary policies. Deposit rates are now in the negative territory at -0.5%, with latest round of quantitative easing injecting about €20bn monthly into financial markets. Furthermore, with the US and China trade deal almost finalised and Brexit uncertainty looking set to be removed next year – following the Tories’ victory in the recent UK general elections – things are starting to look up for the global economy. This bodes well for the eurozone.
Fund statistics:
Alternatives: None
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Sygnia Itrix S&P Eurostoxx 50 ETF Fact Sheet
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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