Satrix announced today that it will launch a new exchange-traded fund to give South African investors exposure to off-shore listing.
Satrix’s Global Equity ETF (STXJGE) is set to launch during the first quarter of 2024 upon approval from the JSE.
The STXJGE will give investors an equity building block that up-weights local companies that have their primary listings offshore by tracking the FTSE/JSE Global Investor Index.
Satrix CIO Kingsley Williams said,” This new fund represents a shift in investment strategy, catering to the market’s evolving needs.”
“It will provide an alternative option for investors who want to diversify their local equity portfolios and incorporate higher exposure towards rand hedge stocks, particularly in light of the upcoming harmonisation of the FTSE/JSE benchmark indices (ALSI and SWIX) in March 2024.”
He said over the past few years, local equity indices using the All Share Index (ALSI) construction methodology have significantly reduced exposure to global companies listed on the JSE.
This includes companies like BHP, Richemont, Glencore, Prosus, and AB InBev.
“This has exposed these equity indices more to local macroeconomic idiosyncrasies (often referred to as SA Inc. factors), which clients may wish to diversify away from within their local equity exposure,” Williams said.
“Investors can blend the Satrix JSE Global Equity ETF with existing ETFs to gain increased exposure to dual-listed companies on the JSE, as historically offered by the ALSI indices.”
Williams explained that the new ETF has a significantly higher rand hedge profile than other broad local equity market indices.
This hedge provides a potential cushion should the local currency weaken.
It also offers a diversified source of revenue from its constituents, with higher earnings emanating from offshore markets across a variety of sectors.
“That makes it ideal for investors with a longer-term investment horizon who can withstand equity-like volatility,” he said.
Satrix said the Satrix JSE Global Equity ETF tracks the recently launched FTSE/JSE Global Investor Index, focusing on the 50 largest companies listed on the JSE.
This approach diverges from broad local equity benchmark indices by using global free-float metrics for weight determination.
Local equity benchmark indices typically reduce the weight of dual-listed companies by only considering the proportion of shares held locally.
The new ETF will, therefore, target the 50 largest JSE-listed companies and use global free-float metrics to offer higher exposure to dual-listed companies.
It will be launched with a total expense ratio of 0.15%.