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The state of the SA’s exchange traded product industry

At end June 2018, the total market cap of all ETFs and ETNs listed on the JSE totalled R84.1 billion.

As at the end of June 2018, the total market capitalisation of all Exchange Traded Funds (ETFs) and Exchange Traded Notes (ETNs) listed on the JSE totalled R84.1 billion. This was a slight decline on the market capitalisation of R85 billion at the end of 2017, a drop of 1.1%.

Full details of the market capitalisation of all individual 94 ETFs can be viewed in the Quarterly Market Capitalisation report downloadable from the etfSA website.

There was some rebound from the total market capitalisation of R80.1 billion as at the end of March 2018, reflecting the recovery in rand hedge ETF securities on the JSE, particularly those tracking global equity markets.

The ETP Industry as at end-June 2018

The total number of ETFs and ETNs in issue rose from 82 at the end of 2017 to 94 by the end of June 2018.  No new ETNs were listed, so the rise in the number of products was purely in ETFs, which is the preferred structure for many investors, particularly institutional managers.

A JSE-listed ETF has to be 100% physically covered at all times, through the exact replication of the index being tracked, so tracking error and volatility is minimised. An ETN does not require full replication, which puts recourse on the creditworthiness of the ETN issuer. In an ETF where all liabilities are fully covered at all times, the issuer’s creditworthiness is not material.

Of the 12 new ETFs listed to date in 2018, ten track foreign bond and equity indices and two provide South African smart beta coverage. Clearly, the volatility of the rand and its recent weakening against major currencies, has rekindled interest in offshore assets. 

The underlying table provides a snapshot of the South African ETP industry as at end June 2018, analysed and ranked by the companies that issue ETPs on the JSE. 

Absa Bank – with 18 ETFs and 5 ETNs, remains the largest issuer of ETPs on the JSE, not only in the number of products, but also in terms of market capitalisation. Absa’s 23 ETPs have a combined market capitalisation of R25 755 million.

However, Absa’s position as the dominant provider of ETFs/ETNs in South Africa is coming under threat.  Absa has always benefitted from large institutional investment in its commodity based ETFs. But NewGold, for instance, now has a market capitalisation of only R12.5 billion, compared with over R20 billion in 2012. The same decline in market capitalisation has occurred for the platinum and palladium based ETFs. 

In December 2012, NewGold had over 150 million ETF securities listed, now this has fallen to 77 million shares listed at June 29, a drop of 49% in the shares in issue. The performance of commodity prices over this period has not necessarily been unfavourable, particularly in rand terms, but interest in commodity based ETFs appears to be waning, possibly due to profit taking by some investors to cover up loses in other asset classes.

The outlook for commodity prices remains cloudy. Synchronised economic growth in both developed and emerging economies remains a possibility, but the Trump trade wars and Brexit uncertainties are dampening expectations.

Sygnia/Itrix – has now moved into a clear second place in the SA ETP industry, based on size. Sygnia Itrix only entered the ETF market in June 2017, when it purchased five offshore index trackers from Deutsche Bank, but it has added a further five ETFs to its JSE listings in the past year. Total market capitalisation of the Deutsche Bank ETFs was just under R12 billion in June 2017, the current market capitalisation of the Sygnia Itrix ETFs is now R18.7 billion, just one year later, a gain of over 55% in a short period of time. 

Undoubtedly, Sygnia Itrix has brought new energy and impact to the ETF market in South Africa and its progress in becoming the dominant player in the industry will be watched with interest. 

Satrix Managers – has given up its place as the second biggest ETF provider to Sygnia, in recent months.  Satrix, which introduced ETFs to the South Africa market in November 1999, still remains the most well-known brand in the SA ETF industry. This positions it well in the retail market, whereas other ETF issuers tend to concentrate on the institutional market. 

After some years of not creating new ETFs for listing, Satrix has issued seven new ETFs in the past year, mainly on international equity indices and seems to be refocussing on growing its market share in the SA Exchange Traded Fund industry.

Standard Bank – Like Absa, has suffered from its focus on commodity based ETFs and ETNs and in the first six months of 2018, redeemed over R1.6 billion in such ETFs, that were delisted on the JSE. However, it remains the fourth largest issuer of ETFs/ETNs in South Africa, with a total market capitalisation of R6.8 billion. 

Standard Liberty – has also been active in issuing new ETFs in the first half of 2018. It has listed five new ETFs, all tracking global indices and using iShares ETFs as the feeder funds for its local listings.  This method, now also used by CoreShares and Satrix, simplifies the creation/redemption process and helps manage costs efficiently.

Smart Beta ETFs

The strategy of listing Exchange Traded Products that focus on tracking certain investment factors or themes, rather than being based purely on market capitalisation criteria, has been a feature of global ETF markets in recent years. South Africa has not lagged in this respect.

As the table below shows, there are 13 listed smart beta ETFs in South Africa, with a total market capitalisation amounting to R3 535 million (R3.5 billion), at end June 2018. ETFs that track future dividend payments or historic dividend consistency, are the most popular smart beta products, accounting for 58% of all funds invested in smart beta ETFs. This mirrors the experience elsewhere in the world, where selecting portfolio of shares, based on high dividend payments, is a proven investment strategy. 

ETFs, based purely on risk factors, have been less successful to date in South Africa as the investment public presumably has difficulty selecting which factors are likely to be optimal at any period in time.  This suggests that multi-factor ETFs, which have proven popular in certain global markets, might find better favour with SA investors.

Mike Brown is the managing director at

*The information and opinions provided herein are of a general nature and do not constitute investment advice

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Could somebody please explain to me where exactly the securities behind my, for example, SYGEURO50 lies. (And by implication of all the ETF’s invested in off shore trackers)
If the worst happens and the ANC really destroys South Africa, will I be able to lay my hands on my capital tied up in ETF’s?

QO1942, I have the same question. I see no one responded here, but have you obtained any insights since this post? Rand denominated is so much easier…. but if not safe from the ANC, then the alternative is needed.

End of comments.





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