Actively managed ETFs coming to the JSE

The Financial Sector Conduct Authority (FSCA) has approved amendments to the JSE listing requirements to enable the listing of actively managed exchange-traded funds (ETFs).

Actively managed ETFs are funds traded on the market where the manager uses an actively managed strategy to produce a return for investors.

Actively managed ETFs differ from passive, index-tracking ETFs, as described below.

• Passive ETFs typically track an index, like the JSE Top 40, and the underlying portfolio is updated regularly to reflect changes in the index.

• Active ETFs are where an investment manager actively manages a portfolio with intraday trading and similar activities.

In April, the JSE announced its intention to amend the JSE listings requirements to enable the listing of actively managed ETFs.

Valdene Reddy, director of capital markets at the JSE, said it was an important change for institutional and retail investors to develop beneficial investment strategies.

“There is rising appetite locally for listed actively managed ETFs. It is in line with international trends where demand for active ETFs is growing,” she said.

Reddy said the amendment of actively managed ETF listing regulations is expected to increase the offering and number of ETF listings on the JSE.

“Most importantly, passive and active ETFs offer investors an opportunity to diversify their portfolios cost-effectively.”

There is a significant international trend to list actively managed ETFs, especially in the USA and Canada.

The first actively managed ETF in the US market was listed in 2008, and to date, more than 1,000 actively managed products are listed across the globe.

The JSE has followed this trend to support demand for actively managed ETFs through its listing requirement amendments.

The Financial Sector Conduct Authority (FSCA) has now approved the amendments to the JSE listings requirements, with an effective date of 14 October 2022.