The Absa NewFunds MAPPS Protect ETF
Equity markets have been on a downward path this year, presenting an opportunity for investors to search for yield in other asset classes. The NewFunds MAPPS Protect ETF is uniquely designed to offer exposure to multi-asset classes. The fund predominantly focuses on government bonds and cash.
Although rated as non-investment-grade, SA bonds are relatively safe as they have a lower risk of default. The country’s bonds were ejected from the FTSE World Government Bond Index as a result of a credit rating downgrade by S&P Global. Broadly, the removal from the index increased interest payments for SA. In its latest announcement on the country’s rating, S&P changed its outlook to positive, citing improved revenue collection in light of higher commodity prices. The rating agency warned however that the country’s structural issues, such as high unemployment, load-shedding and inequality, will continue to weigh on the rating.
Cash carries a lower risk than equities as generally, it does not yield inflation-beating returns. As such, it should be considered in a broader portfolio rather than as a single investment class.
The objective of the Absa NewFunds MAPPS Protect ETF is to prevent short-term losses and provide investors with a real rate of return above inflation through exposure to a diversified portfolio of government inflation-linked bonds, cash and equities. The fund has a low tracking error of 0.1% and a moderate total expense ratio of 0.44%, which is justified 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 inflation-linked bonds and cash. The fund offers quarterly distributions with a short-term investment period.
Fees
- The fund has a total expense ratio of 0.44%.
Top holdings
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The fund invests in equity, cash and inflation-linked bonds based on the value issued by National Treasury and the listed value on the JSE. It also aims to track the performance of the MAPPS Protect Index.
The Absa NewFunds MAPPS Protect ETF (JSE:MAPPSP)
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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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