The CoreShares Preftrax ETF tracks the Preference Share Index offering great yield and efficient tax as it’s taxed as a dividend at 20% rather than as interest (income) which could see a higher tax rate.
But it is delisting at the end of May as the local preference share market dries up. This is because the banks used to be able to include preference shares as tier one capital, but Basel III has reduced that by 10% a year and at the end of 2022 they no longer counted.
This means no new preference shares listing and many of the existing being delisted making the market too small for an efficient ETF.
TIP: Interested in the inner workings of preference shares? In this podcast, Simon Brown talks to Eugene Chemaly from Afrifocus about these products.
If you hold this ETF at close on 31 May you will automatically be moved into the new CoreShares Government bond ETF. This will also be a high yielding ETF, but distributions will be income and taxed accordingly.
There is a range of other bond ETFs locally such as the Satrix Government Bond (JSE code: STXGVI), the S&P SA Sovereign Bond 1+ Year Index (JSE code: ETFBND) or even property ETFs that pay a decent yield (but carry risk of capital loss).
Another alternative is for an investor to create their own preference share portfolio, even copying the ETF holdings with same or different weighting.
PREFTX holdings
Simon Brown
