ETFs set to become R470 trillion industry by 2030

Bianke Neethling • 1 January 2024

Exchange-traded funds (ETFs) are becoming increasingly popular among investors and are set to become a $25 trillion (R468 trillion) industry by 2030.

Satrix CIO Kingsley Williams told Classic Business that ETFs are also a popular investment vehicle in South Africa.

ETFs are similar to unit trusts, where money from many investors is pooled. However, instead of being under the control of a fund manager, it tracks a particular index.

“There are quite a few reasons for this phenomenal take-up of what has really been quite a revolutionary innovation in the investment world,” he said.

“Having full transparency daily of what an investment instrument or investment fund has inside of it – it’s been quite a revolutionary development and technological innovation within the financial services space.” 

Williams explained that index tracking – the foundation around which ETFs have been developed and offered – gives investors certainty about the investment strategy a particular ETF is adopting.

This is because ETFs typically track indices constructed around clearly defined rules and systematic processes for capturing a particular strategy.

“Often, it’s termed ‘passive investing’, which I think most investors would infer that they’re getting market-cap-weighted exposure to a particular asset class or market segments,” Williams said. 

“But indices can be a whole lot more than just that. You can construct indices using any number of elaborate rules to deliver a particular investment outcome through time.”

This, therefore, also allows the investment strategy of a particular ETF to eliminate emotions when rebalancing an ETF.

“And I think the power of that certainty and investment strategy is that investors know that they are always going to get that because the index rebalances in an unemotional way on a systematic predefined schedule,” he said.

“So it gives you high consistency of exposure to that particular strategy through time.”

South African ETFs comprise a small proportion of the global ETF industry but are becoming increasingly popular in the country.

Satrix is the country’s largest index-tracking investment products and ETF provider, with over R150 billion in assets under management.

Sygnia – the country’s second-largest ETF provider – reported recently that Sygnia Itrix assets under management amounted to R37.2 billion in 2023.

Reference: https://dailyinvestor.com/investing/40128/etfs-set-to-become-r470-trillion-industry-by-2030/

Gold versus buying a house

Drikus Greyling • 11 January 2024

An analysis by Daily Investor revealed that buying gold was a much better investment over the last fifty years than buying a house in South Africa.

Over the years, many people have punted property as one of the best investments anybody can make.

American business magnate John D. Rockefeller, one of the wealthiest people who ever lived, said, “The major fortunes in America have been made in land.”

Another wealthy American industrialist, Andrew Carnegie, said, “90% of all millionaires become so through owning real estate.”

There is a widely held view that property is a safe investment that appreciates with time. It is, therefore, unsurprising that most people’s biggest asset is their house.

Gold, in comparison, is seen as a speculative asset that provides a safe haven for investors during uncertain times. However, it is not seen as a way to get rich.

Many super-investors, including Warren Buffett, are not keen on gold as it is not a productive asset like a company making profits and paying dividends.

“The problem with gold is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you,” he said.

To see whether these perceptions hold up, Daily Investor analysed the return on buying an average house in South Africa versus investing that money in gold.

According to the Absa house price index, the average house price in South Africa in 1970 was R15,000. It increased to R2.3 million in 2023.

In 1970, an ounce of gold cost R28.90. Fast forward 53 years, and the price for an ounce of gold increased to R38,000.

That means a R15,000 investment in gold in 1970 would have grown to R19.7 million – significantly more than the R2.3 million for the same property investment.

Put another way, you needed 519 ounces of gold in 1970 to pay for the average house in South Africa. In 2023, you would have needed only 61 ounces to pay for the same house.

The table below compares the growth in property and gold over the last 53 years.

Investment 1970 to 2023

Gold R15,000 to R19,723,000

House R15,000 to R2,300,000

Reference : https://dailyinvestor.com/investing/41449/gold-versus-buying-a-house-the-winner-is-clear/?source=newsletter