What kinds of ETFs are there?

South African ETFs now cover a range of investment markets and investment styles.

Through ETFs you can invest in:

The JSE

ETFs that invest in the JSE, track shares in one of these categories:

• The largest shares on the JSE
  • ETFs that track the top 40 or 50 shares
  • ETFs that track the top 40 shares with dual listed shares weighted according to their availability on the local market (the top 40 Swix or Shareholder Weighted Index)
    
    
• Sectors of the JSE
  • ETFs that track mid-cap shares;
  • ETFs that track the financial sector of the JSE;
  • ETFs that track the industrial sector of the JSE;
  • ETFs that track the resources sector of the JSE;
  • ETFs that track the real estate (property) sector of the JSE; and
  • ETFs that track the preference share sector of the JSE.
    
    
• Shares that represent investment styles
  ETFs can give you exposure to what are known as smart beta indices designed to give you a return better than what you would get if invested in an index that tracks all shares in line with their size on the share market.

Smart beta indices identify shares with certain common characteristics representing what are known as factors in the market.

For example, a smart beta index may identify shares of what are regarded as quality companies that typically deliver good returns. The index targets what is known as the quality factor by identifying which companies have a good return on equity, persistent and growing earnings and a strong balance sheet.

There are South African ETFs that:

• • Track indices of quality shares – with a high profitability or return on equity, persistent and growing earnings and strong balance sheets.
  • Track indices that identify shares that pay high or consistent and growing dividends.
  • Track indices that identify shares with price momentum or increasing prices.
• Track low volatility indices that identify the shares that have been the least volatile in their asset class over time. By avoiding shares that move sharply up or down, these funds aim to deliver better risk-adjusted returns over longer periods.

The bond or listed property markets

These ETFs track bonds, shares or REITS as follows:

• The bond market
  South African ETFs track local government bonds as well as inflation-linked bonds.

• The listed property market
  Local ETFs track the listed property market – property shares listed on the JSE – and one tracks a customised index that upweights property companies that pay a higher income. 

Across asset classes

• There are ETFs that combine the different asset classes in a single ETF. The allocation to the asset classes of equities, bonds, listed property and cash are typically predetermined or static.

In foreign markets

• You can invest in rands and without using your foreign investment allowance in ETFs that track foreign indices giving you exposure to:
  • Global share markets through indices like the Morgan Stanley Capital World Index (MSCI), the Standard & Poors (S&P) 500, the Global 1200, the Eurostoxx or the FTSE 100;
  • Foreign bond markets;
  • Foreign listed property markets;
  • Technology shares listed globally;
  • Specific countries such as China or Japan;
  • Specific commodities such as gold or platinum; or
  • Certain investment strategies such as those that focus on high dividends or environmental, social and governance (ESG) issues.