Nathalie Burrows, Editor at EBnet
South Africa’s exchange traded fund (ETF) market has the products, the momentum and increasingly the big name managers. What it does not yet have is a clear route into all the portfolios where those products could make a difference.
That was a recurring message at Prescient’s 2026 ETF Conference on 21 October: the next stage of growth will depend less on launching another fund and more on making ETFs easier to buy, combine and use. Behind the excitement about innovation sat a practical discussion about distribution, trading costs and the systems that connect investment managers to investors.
First, what is an ETF?
An exchange traded fund is a pooled investment portfolio whose units trade on a stock exchange, much like shares. One purchase gives an investor exposure to the portfolio’s underlying investments, which might include equities, bonds or a combination of assets. Traditionally, ETFs tracked an index. But they have evolved to now also house actively managed strategies, where a manager decides what to buy and sell.
Your next question might then be, why ETFs when an investor can invest in unit trusts? Both can provide professionally managed, diversified portfolios. The important difference is how investors access them: ETFs trade throughout the day at market prices, while conventional unit trusts transact through a management company or platform at a price calculated once daily.
Nor does an ETF automatically mean cheaper. Investors must consider management fees alongside brokerage, platform charges and the bid-offer spread (the gap between buying and selling prices). As one panel discussion at the conference highlighted, an attractive fund fee can lose its shine if trading costs are too high.
From tracking the market to choosing a manager
South Africa’s ETF story began with the Satrix 40 in 2000. For much of the following two decades, ETFs were associated with index tracking and commodity exposure. The introduction of actively managed ETFs (AMETFs) through amendments to the JSE listings requirements in May 2023, changed what was possible.
Prescient’s 2026 ETF Evolution Report puts the market at 141 ETFs with R275 billion under management. Market capitalisation increased by 29%, or approximately R60 billion, during 2025.
The active segment’s expansion is particularly noteworthy. From 10 listings at the beginning of August 2024, it reached 52 by the end of August 2026, with approximately R25 billion in assets. The shelf now includes income strategies, global feeder funds, balanced portfolios and inflation-plus investment objectives.
This broadens the conversation considerably. Investors no longer have to choose between an ETF and active management: they can choose an active manager through an ETF.
But more choice creates responsibilities. This is where benchmarks become important. In the benchmark discussion, Satrix chief investment officer Kingsley Williams and fellow panellists explored the differences between recognised indices and bespoke strategies. A familiar index offers an established investment proposition; a customised approach needs a clear purpose, credible governance and sufficient demand to survive.
Behind the US, learning from Europe
Learnings from the ETF evolution in other jurisdictions were also referenced throughout the day’s conversations. South Africa is still early in our ETF journey compared with the US and Europe.
The US has a particularly strong tax-related incentive supporting ETF adoption. Speakers cautioned against assuming that American growth can simply be replicated locally without recognising those structural advantages.
Europe offers a useful, if imperfect, comparison. Prescient’s report records European ETF assets of approximately $3.8 trillion at the end of July 2026. Passive strategies still dominate, but active ETF flows account for around 7% of the European total, compared with roughly a third in the US.
Europe also demonstrates the power of making saving habitual. Low-cost digital brokers and automated ETF savings plans have brought investing onto people’s phones. In Germany, as an example, ETF savings-plan accounts increased from 7.1 million to 9.5 million in a year.
The UK supplies another lesson: advice economics matter. SpireBay’s Isabell Moessler explained that restrictions on commission in markets including the UK and the Netherlands helped change the incentives around ETF adoption. Yet she challenged the idea that Europe has already solved platform access. Demand is pushing investment in better systems, but friction remains.
South Africa can learn from these markets without waiting to copy every stage of their development.
Why “advised” money is moving more slowly
The institutional opportunity stretches from pension funds and insurers to discretionary fund managers, or DFMs, and wealth managers. Their requirements differ, but implementation matters across all of them.
One major obstacle lies in linked investment service providers, or LISPs: the platforms through which advisers implement investment portfolios. Much of that infrastructure developed around conventional unit trusts, not exchange-traded instruments. And platform development is expensive.
INN8 Invest’s Leigh Kohler highlighted a difficult consequence. DFMs serving clients across several platforms need consistent implementation. If ETFs are accessible on one platform but unavailable on another, portfolio construction can default to what works everywhere. Improving one platform does not immediately unlock the whole market.
Settlement adds another complication. Prescient’s report identifies South Africa’s three-business-day exchange settlement cycle as a source of friction when blending ETFs and unit trusts. The US already operates on next-business-day settlement, with the EU and UK committed to following in October 2027.
Then there is execution. AdviceWorx’s Michelle Noth highlighted brokerage and spreads as factors that can undermine the investment case for professional users. Institutions need confidence not only in the underlying strategy, but also in the price and efficiency of entering or exiting it.
Where the opportunities lie
For institutions, ETFs offer more than another long-term holding.
They can provide temporary market exposure while a pension fund changes managers, reduce the drag from uninvested cash, or deliver a tactical allocation without buying every underlying security separately. Income ETFs can also support liquidity management, subject to the risks of their underlying portfolios.
For DFMs, placing a model share portfolio inside an ETF can simplify administration. Instead of rebalancing numerous individual client accounts, the manager adjusts one underlying portfolio, with investors participating through their ETF holdings.
Prescient Investment Management’s Murray Anderson described the opportunity to reach investors outside traditional unit trust distribution channels, while Standard Bank’s Nivedna Maharaj urged the industry to explain products through their purpose, risk and contribution to financial goals, rather than through technical codes and jargon. It boils down to education and explaining the use cases for both institutional investors, like pension funds, and retail investors.
Future frontiers
Future possibilities include retail hedge fund ETFs and tokenised distribution. But these remain areas for regulatory development and careful design. The future-frontiers discussion emphasised that tokenisation must address custody, ownership and reliable backing by underlying assets.
The conference’s challenge to the industry was practical: make the investment experience work. Better access, competitive execution and clear explanations will determine whether a growing collection of listings becomes a genuinely broader savings market.
For me, practical experience is the best teacher. I invested in an AI World themed AMETF, while sitting in the session. No paperwork. No stockbroker. No advisor. No delays. Real time investing, simple.
For interviews with the speakers at Prescient’s 2026 ETF Conference, click here.
ENDS
