ETFs: The Art Of Passive Investing

A look at how ETFs and ETNs performed over the past year in relation to their benchmarks, and a few experts give their top picks.

- Jaco Visser

As the first exchange-traded fund (ETF) celebrated its 21st anniversary on the JSE, the surge in supply of ETFs comes as evidence that this sector has come into its own. Judging by the returns on these passive investments, ETFs are now part and parcel of investors’ portfolios and even forming a core holding in most.

Adèle Hattingh, manager for business development and exchange-traded products at the JSE, points to the increased acceptance of exchange-traded products (ETPs) in the market. The value of ETFs traded in 2020 was almost three times more than what was traded in 2019, reflecting almost R124bn traded during 2020, according to Hattingh. “In addition, the number of ETF trades had doubled in 2020 and the year-on-year volume increase was 60%.”

Interestingly, the composition of the ETP market is heavily skewed towards ETFs. According to Kingsley Williams, a chief investment officer of Satrix, ETFs constitute about 92% of the ETP market.

With 99 ETFs and exchange-traded notes (ETNs) and a further 36 index-tracking unit trusts, according to the latest Monthly South African ETF, ETN, and Unit Trust Index Tracking Performance Survey for January, there seems to be no halt in the growth of this sector. Despite the surge in product availability and diversification, retirement funds still seem to opt for more traditional destinations.