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
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
Top holdings
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)
New to investing and want to learn more about other ETFs?
Read: Top Fund Picks for December
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
Disclaimer
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.
Remuneration
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.