JSE Showcase GLOBAL MARKETS February 2014 RMB Exchange Traded Funds (ETFs) RMB ETFs Sharp, cost-efficient, passive index-tracking Oct 2014 Yusuf.Wadee@rmb.co.za
Why ETFs – What is an ETF? • ETFs are securities (Like a share) • An ETF purchase is a purchase in a basket or collection of shares • Because an ETF represent a baskets of shares they can also be thought of as a unit trust fund. They are thus both a share and a unit trust fund! • No STT (Securities Transfer tax) payable when buying ETFs. Buyers of ETFs thus save 0.25% on purchase • Simple and transparent • ETFs and ETNs are not the same 2 2 2 Strictly Private and Confidential
2. RMB Top40 ETF • ETF Tracks index of SA’s 40 largest and most liquid shares Financial ratios 1 • 0.1% management fee (equates to a fund TER of 21bps) PE ratio 17.67 12-month historical distribution yield 2.5%pa RMB Top40 top 10 sectors Mining 20.85% Beverages 11.18% Personal Goods 8.39% Performance 1 RMB Top40 ETF Mobile Telecommunications 8.38% 3-month -2.96% Media 8.18% 6-month 4.13% Banks 7.76% 12-month 14.90% Oil & Gas Producers 6.16% 3-year (annualised) 22.02% RMB Top40 top 10 holdings BHP Billiton plc 12.14% SABMiller plc 11.18% Compagnie Fin Richemon 8.39% Naspers Ltd -N- 8.18% MTN Group Ltd 7.6% Note 1. Data for end Sep14 Sasol Limited 6.16% 3 Strictly Private and Confidential 3
Passive trends globally Global ETP assets and number of ETPs by year • Global AUM US$2.4 trillion = US$2.400 000 000 000! Number of funds Assets under management Source: Blackrock report, Mar 2014 4 4 Strictly Private and Confidential
Passive trends globally “ETFs used by both • ETFs globally continue to dominate top holding of big investment portfolios: individuals and institutions” • Tiger 21 Club • Hedge Funds • Pension funds • Individuals • Warren Buffets recently quoted in a letter to his shareholders: • “ My advice to the trustee couldn't be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S & P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.” 5 5 5 Strictly Private and Confidential
Various types of ETFs available • Equity ETFs − Large Companies ETFs − Medium Companies ETFs − Style ETFs − Sector ETFs • Fixed Income ETFs: − Inflation Linked bond ETFs − Government Bond ETFs • Commodity ETFs: − Gold, Platinum etc 6 6 6 Strictly Private and Confidential
Using ETFs to trade the market • ETFs bought and sold depending on individuals view of the market or a particular sector. Long term growth view of Equities – buy a large cap ETF, • If interest rates going into a downward cycle – purchase Nominal Bond ETF • ETFs can be analysed as per any other share – have a look at the P/Es, distribution/dividend pay- outs. Remember an ETF is simply a collection of a few shares and behave no different to any other share. • Common strategies : − Core satellite − Parking cash 7 7 7 Strictly Private and Confidential
Using ETFs to trade the market • Before trades are placed ensure that the there is a price on the other side – All ETF funds have market makers • ETFs trades are better executed at different times in the day. • Preferable to trade ETFs during the day – rather then in the opening and closing JSE auctions • ETFs not as expensive as shares for active portfolio traders- as they save on not paying 0.25% STT each time an ETF is purchased 8 8 8 Strictly Private and Confidential
Passive vs active strategies Percentage of actively managed general equity unit trusts that outperformed the FTSE/JSE All Share Index 1 45.0% • ETFs also form an excellent investment tool 40.0% – and not used just for 43% trading 35.0% • Combination of low cost ETF management fees versus active asset 30.0% managers over time has 29% resulted in active asset 28% 25.0% 26% managers not being able to beat the market over 24% the long-term. 20.0% 19% • Majority of SA active managers do not 15.0% outperform the market 10.0% • Becomes harder to outperform the longer the term 5.0% 0.0% 1-year 2-years 7-years 10-years 3-years 5-years Source: Fundsdata.co.za Note 1. Data based on Total Return after fees, fund performances versus the total return performance of FTSE/JSE All Share Index for period ending 31 Dec 2013 9 9 Strictly Private and Confidential
Passive vs active strategies Percentage of actively managed general property unit trusts that outperformed the FTSE/JSE Listed Property Index 1 90.0% 80.0% 78% 70.0% 60.0% 50.0% 24.1% 40.0% 20.0% 30.0% 26% 20.0% 14% 10.0% 0% 5% 0.0% 1-year 2-years 7-years 3-years 5-years Source: Fundsdata.co.za Note 1. Data based on Total Return after fees, fund performances versus the total return performance of FTSE/JSE Listed Property Index for period ending 30 Apr 2014 10 10 Strictly Private and Confidential
falling! markets are volatile or returns – especially when smooth out investment can be a great way to Rand cost averaging Using ETFs to invest in the market 100% 120% -60% -40% -20% 20% 40% 60% 80% 10 20 30 40 50 60 70 80 0% 0 Oct 07 Oct 07 Dec 07 Dec 07 Feb 08 Feb 08 Apr 08 Apr 08 Jun 08 Investment Strategies: Lump sum versus debit order Jun 08 Aug 08 Aug 08 Oct 08 Oct 08 Dec 08 Dec 08 Feb 09 Feb 09 Apr 09 Apr 09 Jun 09 Jun 09 Aug 09 Debit Order Lump Sum Aug 09 Oct 09 Oct 09 Dec 09 Dec 09 Strictly Private and Confidential Feb 10 Feb 10 All Share Index Apr 10 Apr 10 Jun 10 Jun 10 Aug 10 Aug 10 Oct 10 Oct 10 Dec 10 Dec 10 Feb 11 Feb 11 Apr 11 Apr 11 Jun 11 Jun 11 Aug 11 Aug 11 Oct 11 Oct 11 Dec 11 Dec 11 Feb 12 Feb 12 Apr 12 Apr 12 Jun 12 Jun 12 Aug 12 Aug 12 Oct 12 Oct 12 Dec 12 Dec 12 Feb 13 Feb 13 Apr 13 Apr 13 Jun 13 Jun 13 Aug 13 Aug 13 Oct 13 Oct 13 Dec 13 Dec 13 Feb 14 Feb 14 Apr 14 Apr 14 Jun 14 Jun 14 Aug 14 Aug 14 11 11 11
FNB Share Saver • Share Saver gives you access to the Top 100 shares listed on the JSE by investing in the RMB Top40 and RMB MidCap Exchange Traded Funds (ETFs) • Most cost effective exposure to the equity market in South Africa • Invest from R300 per month via FNB Online Banking www.fnb.co.za 150 140 130 120 110 100 A return of 30.5% since inception 90 80 70 60 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14 Source: RMB Global Markets 12 12 Strictly Private and Confidential 7
THANK YOU For more information visit www.rmb.co.za/investments www.ashburtoninvestments.com 13 Strictly Private and Confidential
Disclaimer Strictly Private & Confidential This presentation has been prepared by FirstRand Bank Limited, acting through Rand Merchant Bank (“RMB”). The information contained in this presentation is confidential and intended solely for the use of the intended recipient. This presentation may contain information proprietary to RMB and accordingly may not be reproduced, acted upon or disseminated in whole or in part without RMB’s prior written consent. By attending this presentation, the intended recipient undertakes to keep the information contained in the presentation confidential and not to do any act or allow same to be done on his behalf which is in breach of the above mentioned prohibition. This presentation contains information which has not been independently verified by RMB. RMB and its directors, officers, employees and agents make no representation and give no warranty with respect to, and assume no responsibility for: the correctness, accuracy and completeness or otherwise of the information contained in this presentation; or the correctness or otherwise of the Advisers’ conclusions based on such information. Any liability of whatsoever nature and howsoever arising on the part of RMB, their directors, officers, employees and agents relating to the contents of this presentation is hereby expressly disclaimed. This presentation is intended for discussion purposes only and does not represent a commitment, proposal, recommendation, offer open for acceptance or agreement to enter into a transaction. Any transaction is subject to the agreement of final terms to be set out in a separate written agreement. The decision to enter into any transaction and to assume the risks associated with the transaction rests solely with the intended recipient. July 2012 14 14 Strictly Private and Confidential 14
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