Portfolio Expenses

The Satrix funds have a low management cost structure which allows them to track the seven indices at a very low cost.

Satrix Managers is resposible for the management of the portfolio or ETF to acheive its investment objective. The investment objective of the various portfolios (ETFs) is to track as closely as possible after costs, the performance of the index over which it has been established.  A management fee is charged by Satrix Managers to manage the portfolios. What’s more, the costs of managing the portfolio, including rebalancing the portfolio if the index changes, can be partially offset by scrip lending of the underlying securities. The investors are therefore offered the benefits of index-tracking at a lower cost than purchasing a traditional tracker fund or trading in the underlying stocks.

The portfolio costs incurred include the management fee,brokerage, auditors fees, bank charges, custodian fees and taxes. All these fees are permissible deductions from the portfolio and are paid from the dividends that accrue to the portfolio (from the underlying shares in the portfolio) and the other income that accrues to the portfolio (interest and scrip lending income). The balance of the income remaining in the fund after deduction of the permissible fees and costs referred to above is distributed to the holders of the Satrix securities. This distribution is done on a quarterly basis.
Therefore the portfolio expenses are incurred by the investor when the distribution is paid out.

For investors to be informed of this cost on a quarterly basis, the unit trust industry uses the concept of a total expense ratio (TER). TER is used to illustrate the costs of portfolios on a comparative basis. Its objective is to endeavour to satisfy the requirement of transparency and to establish an industry standard.

Satrix securities have Total expense ratios of 45.6 basis points (0.456%), significantly lower than expense ratios for actively managed unit trusts. The Satrix RAFI has an expense ratio of 52.7 basis points (0,527%).

The TER does however not take into account the income earned off scrip lending of underlying securities and brokerage expenses in accordance with the industry standard. With the inclusion of the scrip lending income and the brokerage expense you will derive at the Actual Expense Ratio (AER). The actual expense ratio is therefore the actual cost to the investor. The AER will vary depending on the scrip lending income received and the brokerage paid.

The TER and AER is disclosed quarterly and also available in the Satrix Fact Sheets.