What Can ETPs Do For My Investment Portfolio? Performance Excellent long term performance of the South African equity market has meant that an investment in the JSE All Share index would have doubled in value every 4½ years over the past 5-30 years. ETPs provide the performance of an index, by exactly replicating the components of an index. Buy ETPs and perform like the market
JSE All Share Index Excellent Long-Term Returns Annual Returns 30 Year 20 Year 10 Year 7 Year 5 Year 21,1% 16,9% 20,7% 13,3% 20,10% 100000 JSE All Share Index (base 1960 = 100) 10000 1000 100 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Performance The stockmarket has far more positive performance years than negative returns staying invested brings long-term rewards.
JSE All Share Index Returns From 1960 Source: Credit Suisse 2011 1996 1995 2013 1988 2010 2012 2010 1984 2007 2004 2002 2000 1983 2003 2001 1998 1997 1974 1994 1991 In more than 72% of the past fifty five years, the JSE has shown positive annual growth. 1976 1992 1973 1967 1982 2009 2005 1999 2009 1975 1990 1971 1966 1978 2006 1989 1993 2008 1969 1987 1965 1964 1977 1985 1986 1979 1970 1960 1981 1961 1963 1962 1980 1968 1972-30 to - 20-20 to - 10-10 to 0 0 to 10 10 to 20 20 to 30 30 to 40 40 to 50 Over 50 Negative Returns (percentage) Positive The South African share market provides outstanding returns over the long-term.
Performance SA equities have superior long-term performance to other asset classes.
What Can ETFs Do For My Investment Annual Returns For Different Asset Classes 1989-2012 20 20.5 16.3 15 13.6 10 8.0 8.1 9.2 5 0 JSE shares Repay own mortage Bonds Inflation Fixed deposit Gold Source: Standard Bank
Lower Costs ETPs have considerably lower Total Expense Ratios (TERs) than unit trusts. TERs measure the cost of running portfolios. They exclude distribution costs, marketing, commissions and brokerage and any upfront costs paid by investors.
Portfolio? Lower Costs of Investments Average Annual Total Expense Ratios (TERs) Domestic Equity Financial TER (basis points) Unit Trusts 1,66 Satrix FINI 0,45 Domestic Equity Industrial Unit Trusts 1,48 Satrix INDI 0,45 Domestic Equity Large Cap Unit Trusts 1,23 Satrix 40 0,45 Satrix SWIX Top 40 0,45 Domestic Equity Resources & Basic Industry TER (basis points) Unit Trusts 1,63 Satrix RESI 0,45 Domestic Equity Specialist Funds Unit Trusts 1,54 Satrix DVII 0,45 Source: Quarterly Unit Trust Survey (Sept 2013) (shows the average TERs for all unit trusts in each category versus Satrix ETF products)
Lower Costs The impact of a lower annual total cost structures can materially improve investment portfolio returns in the medium to longterm.
R 000s 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Effect of Annual Costs 1 10 20 30 Years Fund A charges annual expenses of 0.46% and compounds at 10% per annum Fund B charges annual expenses of 3.67% and compounds at 10% per annum Source: Unit Trust and Collective Investment Schemes Handbook (September 2008). Lower costs have a measured impact on investments over time Calculation assumes R1 000 a month invested for 30 years. Illustration assumes current value and zero inflation. Excess of Fund A over Fund B is R37 000 after 10 years. R245 000 after 20 years and R966 000 after 30 years.
Lower Risk Index tracking ETPs provide Beta the average return in the market. Only 30% of investors in the market can beat the average market performance (the index). After trading expenses (brokerage, commissions, taxes) even less investors beat the index.
% Underperformance Funds 90 85 80 75 70 Performance of Actively Managed US Mutual Funds vs The Standard & Poors (S&P) Indices (5 year Cycle - 2004 to 2008) Percentage of actively managed US funds underperforming the S&P indices) 71.9% 79.1% 85.5% Most active managers underperform the index (ETFs) in the USA 65 S&P 500 (Large Cap) S&P 400 (Mid Cap) S&P 600 (Small Cap) Source: Standard & Poors Quarterly Survey (December 2008).
35 30 Unit Trusts Beating the FTSE/JSE SWIX Index Benchmark 32% 29% And in South Africa % Outperformance 25 20 15 10 5 20% 16% 21% 19% 0 1 Year 2 Years 3 Years 5 Years 7 Years 10 Years Source: "The Quest for Alpha" - D Wessels - DRW Investment Research (June 2013)