Actively managed exchange traded funds (AMETFs) were introduced in South Africa in 2023 after changes to financial regulations that allowed for them to be traded on the JSE. They are proving popular among providers and investors alike: since May 2023, when the first one was launched, 26 AMETFs, as of January 2025, have listed on the local exchange.
So what are AMETFs, how do they compare with unit trust funds, and are they likely to challenge the long-dominant unit trust in the retail collective investment space?
Active versus passive management
Until the arrival of AMETFs, exchange traded funds were restricted to tracking a market index (or multiple indices in the case of multi-asset ETFs). They do this by holding securities in the same proportion as the index, rebalancing their holdings at fixed intervals (typically quarterly or twice annually) to reflect changes in the index. Otherwise the holdings are untouched by the portfolio manager – hence the term “passive” investment. Most ETFs are still of this type.
Unit trust funds, on the other hand, are mostly actively managed – the portfolio manager buys and sells assets at will, in accordance with the manager’s investment view and internal processes.
Now, AMETF portfolio managers can actively manage the investments in their funds in the same way that unit trust managers can.
ETFs versus unit trusts
The Collective Investment Schemes Control Act (CISCA) governs pooled investment funds, which include unit trusts and most ETFs. The CISCA provisions ensure that, as an investor, you can buy and sell units whenever you want to at a price that reflects their net asset value (NAV). CISCA also provides protections that prevent funds from being looted or mismanaged.
The table below lists the main differences:
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Unit trusts |
ETFs |
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You buy units in a fund through a management company. |
You buy shares in a fund through a stock broker or online broker platform. |
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Management companies typically require a relatively high minimum investment – for example, a lump sum of R10 000. |
Online broker platforms typically have low investment minimums. |
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There are different fee classes for retail and institutional investors. |
There is a single fee structure for all investors. |
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The total investment cost (TIC) may be relatively high, especially for multi-asset funds, which may charge 3% pa or more. |
While TICs of AMETFs are generally higher than those of passive ETFs, they are likely to be lower, on average, than those of actively managed unit trusts. |
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All investment fees are included in the TIC. Advice fees are excluded. |
The TIC does not include your transaction fees on the broker platform. In the case of newer online platforms, these are low. |
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The NAV is determined at the end of each trading day based on the value of the underlying investments. |
As ETFs are traded like shares, their real-time market price may differ slightly from their NAV. This difference is kept in check by a market maker. |
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Dividend and/or interest distributions are paid out or reinvested as units. |
Distributions are paid into your investment account. |
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Withdrawals are generally processed within 24 hours (although it may take longer to reflect in your bank account) |
JSE settlement time is three working days. |
Will AMETFs take off?
In a recent article, “What’s all the fuss about actively managed ETFs?”, Niki Giles, head of strategy at Prescient Fund Services says AMETFs offer flexibility, cost-efficiency and easy accessibility for retail investors. She quotes industry strategist Roland Rousseau, who makes the following analogy: “Listing an ETF is like selling your product on Amazon – compared to a [unit trust] fund, which can only be found in a physical store.”
Giles writes: “The introduction of AMETFs on the JSE has the potential to reshape the landscape of investment in South Africa. With global and local markets moving towards more dynamic, accessible, and cost-effective investment vehicles, it seems likely that AMETFs will continue to grow in popularity. For investors, this presents new opportunities to blend active management with the liquidity and convenience of ETFs – making these products well worth the attention they’re receiving.”
Author’s note: My thanks to Niki Giles of Prescient for checking the facts and offering suggestions.
