Over the last month, we have profiled three property ETFs from the CoreShares stable. This week, we turn to one of the most popular providers of ETFs in South Africa - Satrix.
A domestically focused property ETF, the Satrix Property portfolio launched on the 24 February 2017.
The ETF is a little over a year old now, and has amassed approximately R74 million in value as per its market capitalisation on 6 April 2018.
How is the fund put together?
According to the mandate, the Satrix Property ETF is set up to track, as closely as possible, the value of the S&P SA Composite Property Capped Index.
The index is tasked with limiting underlying stocks to a maximum weighting of 10% at each rebalancing event (a quarterly occurrence). The quarterly rebalancing also takes into account IPOs and inward foreign listings. Otherwise, reconstitution happens annually, using the data as at the last trading date of July every year.
It is worth noting that in order to reduce costs and minimise tracking error, Satrix Property have announced that they may engage in scrip lending activities from time to time. Manufactured (taxable) dividends could arise from such transactions.
Table 1 - Top ten holdings as of 6 April 2018 (Source: www.satrix.co.za)
How does this ETF differ from others?
The only ETF in our series that caps the market weighting of an individual stock at 10%, the overall number of underlying shares is currently (as at 6 April 2018) sitting at twenty holdings.
Not to be confused with CoreShares PTXTEN that takes the top ten holdings and equally allocates 10% to each share, if the stock doesn’t naturally demand a ten percent or more holding due to its market capitalisation, the allocation to it in the portfolio won’t be upped (only reduced).
The next major difference lies in the pricing of the ETF. It is the cheapest of all the ETFs with at least a 1-year track record (the Sygnia ETF is targeting a 0.25% total expense ratio (TER) but is not yet a year old). The latest TER as of 6 April 2018 is published as 0.35% on the Satrix website.
A final difference lies in the fact that he ETF is also available as a unit trust through the Satrix Investment Plan, either via a debit order for as little as R300 per month or a lump sum of R1,000.
Table 2 - Sector weightings as at 31 December 2017 (Source: Satrix Property ETF Factsheet 28 February 2018)
What type of portfolio would benefit most from holding this ETF?
- Growth-oriented portfolio looking to diversify away from equities only
- Income-oriented portfolio focused on income growth over time
- A portfolio that is looking to limit exposure to its top holdings via a cap at 10%
- Portfolios that are exposed to physical property, looking to diversify into listed property
Table 3 - Key information as of 28 February 2018 (Source: Satrix Property ETF Factsheet)
Share price history
The ETF has a little more than a year’s history and has launched into a particularly difficult period for the real estate asset class. As we have come to expect from a passive ETF, it lags the index it tracks marginally (due to tracking error and costs).
Table 4 - Performance table as of 28 February 2018 (Source: Satrix Property ETF Factsheet)
Source: Sharenet chart as of 6 April 2018
Investment Specialist at Discovery Invest
Mark graduated with a Business Science Degree from the University of Cape Town in 2007. He then joined Sharenet, during which time he also completed his B.Com Honours through UNISA. Mark has helped to build, launch and manage derivative and share trading brokerage businesses. He is also a JSE Registered Securities Trader, and has worked on the trading desk at Sharenet. After seven-and-a-half years at Sharenet Mark then moved to Reitway Global (a specialist Global Listed Property Fund Manager) where his passion for property was further kindled. Mark currently works for Discovery Invest as an Investment Specialist on their Investec Managed fund offering. He has over ten years of experience in the equity and asset management sector and can be reached at: email@example.com
The views and opinions (where expressed) in this article are those of the author and do not necessarily reflect the official policy or position of Discovery Invest.