Evolutionary Awards – ETFSA

Category: Evolution in investments

Describe your evolution:

ETFSA launches the JSE’s first listed actively managed balanced fund – The ETFSA Balanced Foundation Prescient AMETF (Share code: ETFSAB).

On the 26th August 2024, ETFSA listed the first fully balanced actively managed AMETF to list on the JSE exchange. It allocates investment to all major asset classes: equities, both local and foreign; bonds, listed property and cash.
The new AMETF is ETFSA’s first product to be listed on the JSE and is issued under the Prescient Manco license.
For many years, ETFSA has fulfilled an industry leadership role in promotion of the local ETF market and ETFs more generally as a robust, contemporary savings vehicle. The business, led by industry veterans, Mike Brown, Nerina Visser and Gareth Stobie, already manages numerous ETF portfolios, not only in Rand, but also in hard currency for a variety of clients spanning pension funds, private clients, retirement products and individuals.

The new Balanced Foundation AMETF brings the following features:
• It has a multi-asset framework that conforms fully with both the Regulation 28 Requirements of the Pension Fund Act, as well as Board Notice 90 of the FSCA that applies to the exposure requirements for a Collective Investment Scheme.
• Investors obtain exposure to both South African as well as Global equites and bonds.
• The ETFSAB has an expected TER (Total Expense Ratio) of 0.52% which is lower than the typical balanced unit trust. This will appeal to investors seeking a cost-effective, multi-asset portfolio selection that is readily available on the market and which can form the foundation of many investments.
• The JSE trading system, together with the appointed market maker for the ETFSAB, will enable the new product to be purchased or sold at any time during the JSE trading day.
• The packaging of this balanced investment portfolio solution, as a Collective Investment Scheme listed on the JSE, brings strong regulatory control, compliance, and governance to investors.
• The Balanced Foundation AMETF has a fixed asset allocation strategy to various asset classes. However in the event of regulatory changes such as Regulation 28 requirements or secular changes in markets, the asset allocation strategy can become more flexible to accommodate such events.

As the name suggests, the ETFSAB will be positioned as the foundation for investment plans for both beginners and advanced investors alike.

The strategic asset allocation of the ETFSAB is as follows:
– 35% Global Equity
– 30% Local Equity
– 25% Bonds
– 5% Cash
– 5% Local Property

Mike Brown, Managing Director of ETFSA, “The ETFSA Balanced Foundation Prescient AMETF is designed for investors who seek a balanced approach to wealth accumulation. By blending stable income-generating assets with growth-oriented investments, both locally and abroad, it aims to achieve sustainable long-term returns, whilst mitigating downside risks. The fund will mirror the existing Wealth Default strategy run by ETFSA within it’s Retirement Annuity (RA) Fund, a fixed asset allocation strategy with scope for some flexibility, if required – hence the active component. “
The historical track record of the Wealth Default portfolio structure has consistently outperformed the ASISA high-equity category average.

Gareth Stobie, ETFSA Director for Strategy and Corporate Development, “This ETF compliments the work that ETFSA already fulfils within the ETF market, that of multi-manager and research leader but also as a specialised provider of clearly defined ETF portfolio solutions. Importantly, it will not impede our ability to objectively analyse the rest of the ETF market and to use all other building block products available”.

“The product will form the ‘default’ option for our clients, particularly with a longer-term time frame, as it is strategically balanced across asset classes. It represents a core option for most investors” Nerina Visser, ETF Strategist at ETFSA.

The AMETF will be launched in partnership with Prescient Management Company. Kim Gibb, CEO of Prescient Manco: “We are delighted to be working with ETFSA, a firm that has been at the centre of the local ETF market development for over a decade. It further profiles our strong white label offering and this AMETF fills a structural gap in the market”.

Describe the impact your evolution has had in response to its identified challenges and targeted outcomes.

The critical challenge addressed with this product is that of access to Reg 28 compliant strategies. Whilst such strategies are readily available from traditional Mancos, platforms and life licenses one could not simply invest via the exchange in a product that was fully balanced across all major asset classes.
Accordingly, users of the exchange including stockbrokers and direct investors have an extra access point to such strategies.

The strategy is also easy to understand, strategic and stable in its design.

Lastly, it is low cost and conforms with the thinking from National treasury around access to simple passive default strategies.

Supporting Documentation >