Nerina Visser’s top ETF picks
Nerina Visser identified one actively managed certificate (AMC) and two exchange-traded funds (ETF) at a recent JSE Stock Picks event – the Sygnia Itrix China ETF, the Satrix RESI EFT and RMB’s Dollar Custodial Certificate.
Visser has over 20 years of experience as an ETF strategist and financial advisor.
She previously served as the president of CFA Society South Africa and is now the director and co-owner of etfSA Portfolio Management Company.
She is, therefore, well-positioned to advise investors on which ETFs and AMCs offer good value and are worth a look.
ETFs are becoming increasingly popular among investors, as they offer a low-cost and relatively low-effort way for investors to get exposure to a wide variety of industries, sectors, companies and regions.
ETFs are similar to unit trusts, where money from many investors is pooled. However, instead of being under the control of a fund manager, it tracks a particular index.
Satrix CIO Kingsley Williams previously explained that index tracking – the foundation around which ETFs have been developed and offered – gives people certainty about the investment strategy a particular ETF is adopting.
This is because ETFs typically track indices constructed around clearly defined rules and systematic processes for capturing a particular strategy.
Visser said that her company’s recent strategy has been to move away from just chasing high returns and adapt a more defensive strategy. This means that they are placing a larger focus on managing the downside risk of ETFs.
Furthermore, they are moving away from tech giants and US dominance in their ETF investments.
She explained that while developing markets have been underperforming developed markets for the last 10 to 15 years, this trend has started to change.
Additionally, she pointed out that the trend regarding China underperforming even emerging markets, is also starting to shift.
Therefore, her three picks are intended to give investors exposure to the growing Chinese economy, the incredible rise in demand for gold, and the safe-haven status of US bonds.
Sygnia Itrix China ETF
Visser said China is well-positioned to take advantage of new technological developments, especially with Chinese tech and AI.
This is why she chose the Sygnia Itrix China ETF as her JSE-listed stock pick.
She explained that this product gives investors exposure to the same stocks as the Satrix China ETF at a third of the price.
The ETF gives investors exposure to Chinese companies in Hong Kong and on the mainland, with well-known companies like Tencent and Alibaba making up a large portion of the index.
Lesser-known Chinese companies like Xiaomi and China Construction Bank are also part of the ETF’s portfolio.
Satrix RESI ETF
On the theme of investing defensively, Visser said she has shifted her focus to gold.
Gold is widely considered a hedge against uncertainty and geopolitical risks. Therefore, the precious metal has had a good run since 2019, with its price rising 85% over the period.
In South Africa specifically, gold miners are having a good run, as the country’s more stable energy supply means these producers have been able to earn a larger profit on their gold.
Visser explained that investors can get good exposure to gold through the Satrix RESI ETF, which has morphed over the last year to include more gold producers.
This index tracks the FTSE/JSE Capped Resources 10 Index, which includes the 10 largest resource companies listed on the JSE, ranked by investable market cap.
The ETF now has 50% exposure to gold producers and about 16% exposure to platinum producers.
However, the ETF is still more diversified than an ETF which gives investors exposure purely to gold.
Dollar Custodial Certificate
Visser said that Rand Merchant Bank’s Dollar Custodial Certificate provides a better investment in the US as opposed to investing in the US money market when interest rates are lowered.
The Dollar Custodial Certificate is traded on the JSE, giving South Africans access to US government bonds.
She explained that US Secretary of the Treasury, Scott Bessent, and President Donald Trump’s “333 plan” will not impact the short-term interest rate, which is up to the Federal Reserve, but that they are targeting the 10-year government bond yield.
This plan aims to bring down the US budget deficit to 3%, increase oil production in the US by 3 million barrels a day, and sustain 3% economic growth by cutting taxes.
She said that this will increase value of the 10 year government bond yield and that the best way South Africans can get exposure to that market is through the Dollar Custodial Certificate.
Through this product, South Africans will experience a capital gain when the price of the government bonds go up as the yield goes down.
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