After a relatively slow start compared with some offshore markets, the exchange traded fund (ETF) industry is flourishing in South Africa, enhanced by the relatively recent introduction of actively managed ETFs (AMETFs).
According to exchange-traded product platform Etfsa’s quarterly report to the end of September, ETF assets under management total about R273 billion, of which about one tenth (R26 billion) is in AMETFs. This nonetheless remains a small fraction of total collective investment scheme assets, at about R4 trillion.
In October, the Prescient Fund Services ETF Conference brought together senior leaders, investment managers and specialists from across South Africa’s ETF industry. Craig Mockford, CEO of Prescient Fund Services, said there were 141 ETFs listed on the JSE, and AMETFs had grown from 10 in August 2024 to more than 50.
Behind every ETF investment, Mockford reminded delegates, is an ordinary investor. “A retirement fund member, a policyholder, a family saving for their future – they are the ones who benefit if this industry becomes more efficient,” he said.
Panelists from Adviceworx, Ninety One, Investec and EasyETFs described a market where younger, digitally savvy investors are driving retail adoption through app-based platforms. This raised questions about the role of advisers, traditional investment platforms and retirement funds, where adoption has been slower.
Kim Gibb, CEO of Prescient Management Company, said the opportunities were not in doubt; it was how to unlock them. “South Africa has real advantages: one central exchange, some of the most innovative retail platforms around, and a growing awareness of what ETFs can do. But we need advisers to feel confident using them, platforms to make them easy to hold and investors to understand them,” she said.
One selling point of ETFs, which now may become a sticking point with the advent of AMETFs, has been their low investment costs. Because index-tracking ETFs do not incur high research and management costs, they have been marketed to South Africans as a low-cost alternative to actively managed unit trust funds. However, AMETFs do incur these additional costs, so investors should expect to pay more.
But the other big selling point, which is perhaps not stressed enough, is the ease with which ETFs can be bought and sold.
In an article titled “ETF distribution: It’s so simple, so why isn’t everyone doing it?”
Hayden Reinders, Head of Business Development at Prescient Fund Services, says: “One of the most common things we hear in the market is that people expect ETFs to be cheaper. However, there is not always a recognition of what the fee should be compared to. An AMETF is the same pooled collective investment portfolio that investors already know and trust, managed by asset managers within set investment parameters. Their attraction lies in the fact that investors can purchase an AMETF as easily as buying a share: it is listed on an exchange and traded in the same way as any listed security.
“Since AMETFs are tradable intraday, investment portfolios can react in real time to market changes, movements and macro events. Advisers can use AMETFs in basket portfolios to meet the risk profiles of their clients, and can make instant adjustments simply by buying or selling securities. This can be more efficient than switching investments on a linked investment service provider platform.”
New AMETFs broaden the market
Asset managers are seeing the opportunities of offering AMETFs and are bringing more of them to market, covering a wider diversity of investment strategies and exposures. In November, the JSE announced new products from Laurium, Ninety One, and EasyETFs.
“The addition of the new AMETFs reflects the continued evolution of this segment of our market and growing demand for greater choice in how investors access actively managed strategies,” said Adèle Hattingh, Specialist Securities Manager at the JSE. “It is encouraging to see issuers bringing differentiated investment approaches to the market, spanning both South African and global equity exposure. This strengthens the breadth of investment solutions available on the JSE and reinforces our role in creating the market infrastructure that enables product innovation and greater investor choice.”
