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NEW! SATRIX PROPERTY ETF

Article by Satrix Investments

In this article we discuss the key aspects of the Satrix Property ETF which listed on the JSE on 24 Feb 2017.


Satrix is launching new ETFs

During the course of 2017, Satrix will be adding a range of exciting new ETFs to our product suite. As a first phase, we have decided to expand the range to offer two crucial asset classes, namely listed property and inflation-linked bonds. Both these asset classes play an important role in a diversified portfolio. In this article we discuss the key aspects of the Satrix Property ETF.


Description

The Satrix Property ETF tracks the performance of the S&P South Africa Composite Property Capped Index. This index is a market-value weighted index of all companies in the S&P South Africa Composite index which are classified as property companies, defined as companies investing in physical real estate assets or companies that derive more than 60% of total revenue from real estate related activities. Importantly, the index is capped at 10%, which means that no single stock weight is more than 10% at each rebalancing date. This practice of capping ensures that the index is more evenly weighted and isn’t highly concentrated in a few large stocks. Currently the index comprises 15 companies (see Table 1), which is rebalanced quarterly at March, June, September and December.


Table 1: Constituents of the index as at 31 December 2016

Source: S&P. Data as at 31 December 2016


Why invest in listed property

The primary motivation to have exposure to listed property is the attractive yield offered by this asset class to investors. Property has also historically offered investors strong capital appreciation, of which the yield (driven by strong dividend growth) has made up a large component of its total return. A unique characteristic of listed property is its unusual drivers, having the qualities of both bonds (with an income stream sensitive to interest rates) and equities (with exposure to economic growth). This appealing feature allows listed property to provide a layer of diversification to an investor’s portfolio.


Figure 1: Sector and country breakdown

Source: S&P. Data as at 31 December 2016


Risk and return profile of S&P SA Composite Property Capped Index and other SA asset classes 

Listed property has been the best performing SA asset class over the last 10 years, with the Satrix Property ETF being a perfect vehicle to attain this exposure. The fund is well suited for clients considering index tracking to gain exposure to both South African property stocks, as well as those property companies domiciled in the UK.


Figure 2: Total returns of S&P SA Composite Property Capped Index

Source: S&P. Data as at 31 December 2016



Figure 3: Historical risk and returns of SA asset classes (10 years)

Source: S&P, Bloomberg. Data as at 31 December 2016


Read more about the new Satrix Inflation-linked Bond ETF

POSTED : 7 FEBRUARY 2017

Read more in Fund Focus