The Absa NewFunds MAPPS Protect ETF
High inflation around the globe has necessitated central banks to increase interest rates aggressively, sparking fears of a recession. Equity markets are in negative territory year-to-date, leaving investors with no option but to diversify their portfolios.
The fund is tilted towards the tech, basic materials, telecoms and banking sectors. Most of the companies within this exchange-traded fund (ETF) have a heavy weighting on the overall market Index. Companies such as British American Tobacco have higher market capitalisation, thus its up or down move influences the fund significantly.
The JSE index’s performance has been relatively modest, particularly over the past five years. This is evidenced by the fund’s five-year return of 4.10%. A significant majority of the biggest companies in the JSE earn a notable amount of revenue outside the borders of SA, leaving room for currency risk. Interest rate increases pose a risk to companies and the overall economy. We expect a bumpy road ahead until the inflation rate goes down. While markets are down, it might be useful for investors to consider portfolio diversification.
The objective of the Absa NewFunds Growth ETF is to prevent short-term losses and provide investors with capital and income growth through exposure to a diversified portfolio of bonds, cash and equities. It has a total expense ratio of 0.45% and a tracking error of 0.13%, which are reasonable given the different asset classes it holds.
Fund suitability
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This ETF is suitable for investors seeking a cost-efficient and convenient investment with exposure to a diversified portfolio of different asset classes, such as equity, government bonds and cash. The fund offers quarterly distributions with a short-term investment period.
Fees
- The fund has a total expense ratio of 0.45%.
Top holdings
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The fund has a growth strategy and invests in various asset classes, such as equity. This includes Naspers, which has been a darling of the JSE, cash and inflation-linked bonds. It also aims to track the performance of the MAPPS Protect Index.
The Absa NewFunds MAPPS Growth ETF (JSE:MAPPSG)
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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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