Satrix MSCI World Feeder ETF
Just two years after turmoil in the markets following the Covid pandemic, market participants are having to contend with a bearish market. High inflation and energy costs, exacerbated by the Russia-Ukraine war, resulted in aggressive interest rate hikes from major central banks around the world, thus sparking fears of a global slowdown.
The US has experienced two consecutive declines in real GDP of -1.6% and -0.6% in Q1 and Q2 respectively. The Federal Reserve Bank’s interest rate hikes are supportive of a stronger dollar, which hurts US companies that operate internationally.
China grew by a mere 0.4% in Q2, partly as a result of the zero Covid policy implemented earlier this year. The world’s second largest economy is experiencing a drought and the government has introduced electricity curbs in response to falling hydroelectric capacity. The immediate consequence is that industrial production in the provinces of Sichuan, Jiangsu, Anhui and Zhejiang will decline significantly.
The fund holds a diversified portfolio of companies domiciled in many parts of the developed world. The OECD’s interim economic outlook released in September projects a modest global growth of 3% this year before slowing further to 2.2% in 2023. The organisation admits that risks to this forecast are biased downward, pressured by higher interest rates.
The fund has delivered decent results of 13.72% over the past five years; however, in line with global markets, it finds itself in a negative territory year to date. It has a total expense ratio of 0.35%.
The objective of the fund is to provide a total return equivalent to that of the MSCI World Index in rands. It has a low tracking error of 0.06%, suggesting that the fund is rebalanced frequently to match the underlying index. It has a reasonable total expense ratio of 0.35%.
Fund suitability
- This ETF is ideal for investors seeking diversified exposure to some of the world’s best performing companies in more than 23 markets. The fund is suitable for long-term investors who can stomach short-term volatility or losses. In light of the expected slowdown, the fund will offer a diversified exposure to some of world’s well-capitalised sectors.
Fees
- The fund has a total expense ratio of 0.35%.
Top holdings
- The fund holdings are tilted towards the tech, financials, healthcare, consumer discretionary and staples sectors. More than two-thirds of the companies are domiciled in the US, followed by Japan, Canada and France.
Analysis of the fund’s strategy
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The Satrix MSCI World ETF provides exposure to some of the world’s best companies, most of which are domiciled in developed markets.
Satrix MSCI World Feeder ETF (JSE:STXWDM)
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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 EasyEquities 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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