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Satrix lists new local bond ETF

The fund will track the S&P South Africa Sovereign Bond 1+ Year Index.

Satrix lists new local bond ETF

In the JSE’s first ever virtual listing, the Satrix SA Bond ETF was added to the exchange’s main board on Thursday morning. The fund is Satrix’s sixteenth ETF and its first in the nominal bond space.

Satrix has managed a nominal bond unit trust – the Satrix Bond Index fund – since 2008. It also offers the Satrix Inflation-Linked Bond ETF, which tracks the S&P South Africa Sovereign Inflation-Linked Bond 1+ Year Index.

The Satrix SA Bond ETF is, however, the firm’s first exhange-traded product to offer nominal bond exposure. It is also the first ETF in the country to track the S&P South Africa Sovereign Bond 1+ Year Index.

“The market is probably more familiar with the [FTSE/JSE] Govi Index, in the sovereign bond market, but we’ve gone with the S&P version,” said Yusuf Wadee, head of exchange-traded products at Satrix. “The performance of the two indices and their volatility is almost identical, but we have chosen the S&P index for consistency. We use the S&P index for our inflation-linked bond ETF, so it made sense to go with S&P version for nominal bond ETF as well.”

The index includes only sovereign bonds, with no exposure to parastatals or government-linked entities. It is therefore distinct from the FTSE/JSE All Bond Index (Albi), which has this broader coverage.

Source: Satrix (Click to enlarge)

According to the JSE, the Satrix SA Bond ETF is the sixth local bond fund to list on the bourse. 

The JSE’s total ETF market cap has now grown to close to R95bn, and the average trade in these instruments in 2020 has been R600m per day. This is almost three times the daily average recorded over 2019.

More to come

The listing of the Satrix SA Bond ETF is the first of seven planned additions by the firm in 2020. 

“We’ve been in the ETF business since 2000, starting out with the equity ETFs,” said Wadee. “In the last couple of years we have built out the offshore range, which has been quite successful, but for a long time we have wanted to offer our clients a product that allowed them to diversify through bond exposure.”

CEO Helena Conradie said that further listings in 2020 will expand on this diversification theme.

“I do think that for local ETFs the equity space is quite covered,” said Conradie. “It doesn’t really make sense to launch another large cap index fund, for example. But if you think of themes in the world like ESG, or international commodities, these are areas where we definitely can expand. So those are the things we are adding to our suite.”

She said that this approach is likely to be true in the wider market as well.

“I don’t think we need hundreds more ETFs in South Africa,” said Conradie. “What we might need is products tracking more specialised, niche indices.”

The Satrix SA Bond ETF targets an annual total expense ratio (TER) of 0.25%.

 

 

 

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