Satrix40 (STX40)

 

Satrix is a well renowned investment arm that is popularly known as an easy and cost effective way to break into the Johannesburg Stock Exchange (JSE).

 

The JSE provides a market where securities can be traded freely under a regulated procedure. It not only channels funds into the economy, but also provides investors with returns on investments in the form of dividends.

 

The Sandton-based institution is defined as a stock exchange where stocks are purchased and sold: “It is the largest stock exchange on the entire African continent and is primarily dominated by mining companies.” This is due to the fact that it was originally established in 1887 by the mining industry as a way to raise funds.

 

Information that listed companies share with their investors, either voluntarily or due to their listing obligations, may affect the price of securities trading on the JSE. There are two divisions a company may choose to be listed under – the Main Board or the Alternative Exchange (AltX).

 

The JSE is viewed as Africa’s premier exchange. Companies looking to grow their business by means of the investment of external shareholders often list on the JSE.

 

Satrix 40 is an exchange traded fund registered in South Africa. The aim of the Fund is to mirror the performance of the ALSI 40 Index and allow intraday trading of a basket of stocks in one single trade. The Fund invests in the top 40 companies on the JSE Securities Exchange.

 

Looking at the last 10 years performance of Satrix 40, the investment trend is going up and continuously expanding. Even though returns are not guaranteed, the market has more than doubled from the 2008 low of almost R16, showing an annual increase of over 20% year on year.

 

Looking at the STX40 data from 2000 to mid 2013, it shows an average annual (January to December) increase of just over 13% every year.

 

Together with online brokerage EasyEquities, Satrix has introduced SatrixNOW as a new way for investors to access its products. The platform is available through the Satrix website, but is administered by EasyEquities and uses the latter’s technology.

 

SATRIX 40 Background

 

Satrix is a leading provider of passive investment products in South Africa, with more than R50bn in assets under management invested in its wide range of retail and institutional offerings. Satrix manages index-tracking portfolios for its segregated mandates, Exchange Traded Funds (ETF’s) and Unit Trusts.

 

Satrix has a number of products and the company’s CEO Helena Conradie broke these down.

 

“We made it very simple. We don’t have a unique tax-free savings product. We just added that option to all of our products. We have 18 products in total; seven Exchange Traded Funds and 11 Unit Trusts, and you can invest in all those in that tax-free option. Which one? That forms part of your total investment decision as with any other decision, in which product you invest. This is just a portion that is tax-free. If you go to a financial advisor, they can look at your specific circumstances and whether you should perhaps split this R30k over different options. The total number of factors that is always important in a total portfolio…this will apply to this decision as well,” she said.

 

The first to launch ETFs in South Africa in 2000 with the launch of its flagship Satrix Top 40 ETF (with a market capitalization of nearly R8 billion), Satrix has been a pioneer in the passive investment industry; launching a number of new and innovative index tracking products over the years.

 

Satrix today combines the ETF business of Satrix Managers (RF) (Pty) Limited (a registered and approved management company and an authorised financial services provider), of which Sanlam was a joint owner with Deutsche Bank until August 2012 when it became wholly-owned subsidiary of the Sanlam Group, and SIM. Smartcore (a division of Sanlam Investment Management (Pty) Limited, who have performed the asset management of the Satrix ETFs since inception), being the passive investment management business within Sanlam Investments.

 

Now rebranded and functioning as a single operating unit (although remaining as separate legal entities for regulatory purposes), Satrix provides a full array of traditional and smart index products while simultaneously providing investors with the reassurance and backing of being part of a larger financial services group that has looked after the financial futures of many SA investors for more than 95 years.

 

Satrix is uniquely positioned to provide all services associated with passive investment, including fund administration, support and the investment management of a comprehensive range of ETF and Unit Trust funds.

 

Satrix offers retail investors listed ETFs, Unit Trust funds and a soon to be launched Retirement Annuity product, while institutional investors can access the same underlying products via segregated portfolios. Satrix’s product range includes traditional market cap-weighted indices, style- and theme-based smart indices, as well as sector-specific funds. All of these are managed in-house by a dedicated team of portfolio managers with more than a decade’s investment experience.

 

The Satrix asset management team (a division of Sanlam Investment Management (Pty) Limited) also manages more than R10bn invested in international tracker funds for a range of local and international clients. The team has launched a number of firsts in the SA passive investment industry, including the first Exchange Traded Fund, the first 130/30 short-extension institutional fund and, most recently, a balanced index Unit Trust fund with a smart equity core. We have also been at the forefront of what has been a global shift towards smart-beta investing, giving local investors access to a range of exciting “anything but passive”, but still cost-effective, investment funds.

 

How Satrix works

 

Satrix offers a range of Exchange Traded Funds (ETFs), which are listed passively managed investment funds with the aim of replicating the price and yield performance of a particular index.

 

This objective is achieved by a fund holding the exact weighting and number of shares as constitutes the particular index it tracks. Satrix currently offers index-tracking products across multiple asset classes, including SA equities, Bonds, Property and International equities.

 

Investing in Satrix is an efficient way of gaining diversified market exposure at low costs. You are able to invest in the performance of the JSE with one simple, cost effective investment.

 

Satrix securities are issued by Satrix Managers (RF) (Pty) Ltd, which is registered by the Financial Services Board as an approved manager (manco) of two Collective Investment Schemes (CIS) under which the respective ETF and unit trust funds offered by Satrix have been established. Satrix’s ETFs are listed on the JSE (and are accordingly subject to the JSE Listing Requirements) and traded like any other listed share.

 

Holding the underlying basket of shares at all times enables the Satrix Trust to replicate the index performance (price and dividends). Satrix is an authorised financial services provider (FSP no. 15658) and an approved manager of two collective investment schemes (under which the Satrix tracker funds have been established). The asset management of the various portfolios is performed by the Satrix asset management team (formerly Sim Smartcore, which is a division of Sanlam Investment Management (Pty) Limited). Sanlam Investment Management (Pty) Limited is also an authorized financial services provider.

 

Satrix is one of the most effective ways of getting exposure to the top shares on the JSE, even if a prospective investor only has a very small amount to invest. These investments start off from as little as R1000.

 

Like any other listed share, Satrix securities can be bought and sold through a stockbroker or online trading account.

 

If the prospective investor does not have a stockbroker or online trading account, Satrix securities can also be acquired through the Satrix Investment Plan.

 

Satrix Investment Plan

 

Application and additional investment forms can be completed online, but they need to be printed, signed and then submitted via fax or email.

 

On the Satrix Investment Plan, there is an annual platform administration fee of 0.60% and brokerage of 0.08% on each transaction. It is possible to set up monthly or quarterly debit orders to purchase securities.

 

Satrix ETFs have always been available through the Satrix Investment Plan, which itself was established to allow investors to buy the products without needing to open an account with a stock broker.

 

SatrixNOW

 

SatrixNOW is a new online plan administered by EasyEquities. The experience is fully online and there is no printing or signing of documentation required.

 

There is no ongoing administration fee and brokerage on each transaction is 0.25%. The Debit Order functionality is currently not available but it will soon be unearthed to make transactions simpler.

 

SatrixNOW will also benefit from the concept of fractional share ownership, pioneered by EasyEquities. That means that investors will be able to buy Satrix securities to the full value of whatever amount they invest, regardless of the underlying price of the ETFs.

 

This was always one of the major drawbacks of other ETF investment platforms, as investors tended to have amounts of money sitting there in cash as they just didn’t have enough to make the purchase of a full security. That will no longer be the case.

 

Although a debit order functionality has not yet been set up, that will also soon be established so that investors can set up their investments and effectively let them take care of themselves. Conradie also indicated that Satrix intends making it possible for anyone to migrate their ETF holdings from the Satrix Investment Plan to SatrixNOW. This is not yet possible, but is something they are working on.

 

In addition, Satrix is planning to add its unit trusts to this platform as well. As its unit trust offering has quickly surpassed its suite of ETFs in terms of the number of options available, this will be of great advantage to investors who want a fully online experience.

 

PROFILES

 

Satrix RAFI 40

 

The Satrix RAFI is an ETF FTSE/JSE index that weights the underlying constituents using four fundamental factors (dividends, cash flow, sales and book value), rather than pure market capitalization.

 

Satrix FINI

 

The Satrix FINI is a convenient way to invest in a composite of the top 15 shares in the financial sector on the JSE Securities Exchange.

 

Satrix INDI

 

The Satrix INDI is a convenient way to invest in a composite of the top 25 shares in the Industrial sector on the JSE Securities Exchange.

 

Satrix RESI

 

The Satrix RESI is a convenient way to invest in a composite of the 10 resource shares listed on the JSE Securities Exchange.

 

Satrix Divi

 

Satrix Dividend Plus is an exchange-traded fund registered in South Africa. The Satrix Dividend portfolio will invest in the FTSE/JSE Dividend Plus Index. This consists of 30 companies, selected from the JSE Top 40 and Mid-Cap indices that are expected to pay the best normal dividends over the forthcoming year.

 

Satrix Quality Index Fund

 

The mandate of the Satrix Quality Index Fund is to track as closely as possible the S&P SA Quality Index. Satrix Quality Index Fund is registered as a Collective Investment Scheme.

 

Satrix Quality Index Fund pays out dividends net of withholding tax each quarter all the dividends received from companies in this index, less the net costs of running the portfolio. The index rebalances twice a year in June and December.

 

Satrix RESI ETF

 

The mandate of the Satrix Resi portfolio (“Satrix RESI”) is to track as closely as possible the value of the FTSE/JSE Capped Resources 10 index. Satrix Resi is an index tracking fund, registered as a Collective Investment Scheme and is also listed on the JSE Securities Exchange as an Exchange Traded Fund.

 

The Satrix Resi provides investors with the price performance of the FTSE/JSE Capped Resources 10 index and pays all the dividends received from companies in the index to investors, on a quarterly basis, net of costs. The Satrix Resi Trust engages in scrip lending with the sole objective of reducing its costs thereby enhancing the tracking performance of the portfolio. Manufactured (taxable) dividends could arise from such transactions.