The ETF landscape is expanding in SA, with Actively Managed ETFs introduced earlier this year breaking away from the traditional index-tracking model.

The recalibration of US interest rates by the Federal Reserve to the highest level in 15 years, has elevated bonds as drivers of real returns, prompting investors to reconsider fixed income as an integral component of their portfolios.

CIO at Sasfin Craig Pheiffer has previously emphasised the straightforward utility of ETFs, in providing investors with long-term returns from specific asset classes.

Using the example of the Fixed Income arena, particularly considering multi-decade high US interest rates, Pheiffer underscored the necessity for portfolio managers to address these macroeconomic shifts actively.

CIO at Old Mutual Wealth Andrew Dittberner has also confirmed this trend, explaining their approach of tactically allocating about 20-25 well-vetted businesses alongside ETFs in personal share portfolios.

10X Investments has echoed this sentiment.

‘A notable trend observed by 10X is the increasing integration of ETFs, particularly fixed income ETFs, into share portfolios traditionally dominated by individual stocks,’ according to Michelle Noth, head of financial intermediaries at 10X Investments. (pictured below)

Michelle Noth

‘The global ETF industry, currently valued at US$10tr, is poised to triple in the next decade. The appeal lies in the simplicity, accessibility and cost-effectiveness of ETFs, making them suitable for various investor profiles.

ETFs are utilised as building blocks for creating diversified, multi-asset, global portfolios that span different sectors and regions,’ she said.

In South Africa, the ETF landscape is expanding, with Actively Managed ETFs (AMETFs) introduced earlier this year, breaking away from the traditional index-tracking model.

The 10X Income AMETF, launched in May, exemplifies this evolution. Tracking the R3.8bn 10X Income Fund, this ETF is designed for investors seeking bond-like returns with lower risk.

Co-managed by Anton Eser and Chris Eddy, the 10X Income AMETF employs a rules-based strategic asset allocation approach. It aims to deliver returns of inflation plus 2.5 percentage points over rolling 3-year periods.

The portfolio comprises diversified exposure to the global credit market, (encompassing both investment-grade and high-yield assets across 425 issuers in the US and Europe), government bonds, linkers and money market exposures both locally and abroad.

The 10X Income AMETF offers a globally diversified, managed income strategy in the accessible form of an ETF on the JSE as well as a traditional unit trust available via LISPs.

With a maximum duration of three years and currently yielding around 9.7%, which matured on 12 December, it provides investors with an opportunity to navigate fixed income markets for consistent, low-risk returns, said Noth.

‘ETFs are proving to be versatile and efficient tools embraced by investment managers globally and in South Africa. The growing adoption of ETFs in personal share portfolios reflects their ability to enhance diversification, manage risk and deliver cost-effective solutions.

As the ETF landscape continues to evolve, investors can anticipate more innovative strategies, unlocking new avenues for achieving optimal outcomes in their portfolios,’ she added.

The 10X Income AMETF, latest performance metrics showed a 2.3% return at the end of November and a 9.7% yield-to-maturity as of 12 December.

Source: Ruan Jooste, Citywire

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