Satrix Property ETF
The Satrix Property ETF provides low cost, passive exposure to SA’s listed property companies/Real Estate Investment Trusts (Reits). Interestingly, it is one of only two ETFs in the local market focusing on SA-listed Reits as most of the other Reit ETFs focus on global listed property exposure.
Its peer, the 1nvest SA Property ETF, tracks the performance of the JSE SA Listed Property Index, while it tracks the performance of the S&P SA Composite Property Capped Index. The index, which is a carve-out of the S&P SA Composite Index, caps the maximum value of each share at 10.0% using the float adjusted market capitalisation method, which excludes non-tradeable shares at companies. We think that the specialised nature of the index somewhat explains its higher total investment cost of 0.35% compared to 0.29% for the 1nvest SA Property ETF.
Overall, the two ETFs have similar holdings; however, the Satrix Property ETF has more evenly distributed holdings which should arguably enhance its risk-adjusted returns due to the maximum 10.0% cap on each share. However, analysis of the two funds’ respective performance figures shows that the 1nvest SA Property ETF has outperformed the Satrix Property ETF over the three- and five-year periods to end-August. This is particularly interesting as a short- term analysis of returns in 2021 when the SA Reits recovered strongly shows that the S&P SA Composite Property Capped Index (Satrix Property ETF benchmark) returned 39.9% vs 25.7% for the JSE SA Listed Property Index (1nvest SA Property ETF benchmark). However, despite the short-term underperformance of the 1nvest Property ETF, what this analysis shows is the importance of fees – which we think is also one of the drivers (in addition to the different benchmarks) of the difference in performance between the funds and why the 1nvest SA Property ETF has outperformed its Satrix counterpart over the long term.
The Satrix Property ETF tracks the value (price and income) of the S&P SA Composite Property Capped Index. The S&P SA Composite Property Capped Index carves out the S&P South Africa Composite Property stocks to ensure that no single stock weighs more than 10% of the index at each rebalancing. It is an index tracking fund, registered as a Collective Investment Scheme, and is also listed on the Johannesburg Stock Exchange as an exchange traded fund.
Fund suitability
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This fund suits investors seeking low-cost, passive exposure to SA listed property. Given its high risk, we think this fund suits investors with an investment horizon of five years. Investors should also consider this ETF as part of an overall ETF portfolio to potentially improve diversification and investment returns.
Fees
- The fund has a total investment cost of 0.35%.
Top holdings
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NEPI Rockcastle accounted for 10.7% of total assets to end-August. From an index perspective, diversified Reits lead the portfolio holdings (43.6%), followed by retail (24.4%), real estate (19.8%), industrial (8.4%) and storage Reits (3.4%).
Satrix Property ETF (JSE:STXPRO)
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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
Disclaimer
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