Since this blog first appeared in February 2016, the local market hasn’t made you rich. Internationally, too, the markets haven’t exactly been sweeping us off our feet. Luckily for investors in this and other dollar-denominated ETFs, there has been plenty of currency movement; for offshore ETF investors a weak rand makes for a strong portfolio.
The Sygnia iTrix MSCI World ETF (SYGWD) is one of seven* world-wide ETFs that will unlock international investing from our sunny shores. It invests in 1652 companies in 33 developed markets around the world.
While the MSCI index tracks thousands companies, this ETF only invests in the top 1,000 companies on the index for the sake of liquidity. American companies make up 57.8% of this ETF. The rest of the portfolio is made up of investments in countries like Germany, Canada, France and the United Kingdom. You’ll notice that all of these countries have relatively stable economies, and that is exactly the point.
When the rand takes a blow due to local political or economic uncertainty, these countries remain unaffected. Not only do the majority of the companies earn dollars, each ETF unit you already hold becomes worth more by the amount the currency moved. This means each ETF unit can increase in value without the market or companies having to do anything. Your Top 40 ETF could be doing very poorly indeed, while your SYGWD continues to make you money.
Of course, the opposite is also true. In addition to being the year that Sex on Fire was released, 2008 also saw the American and world economy fall flat on its face. The South African economy continued to grow during that time, albeit very slowly. If you had spread your investments between countries as well as companies and sectors, you would have been better off than if you had fewer investments.
The best part is that you can buy this ETF exactly where you buy your Top 40 ETF – through your broker. You don’t need to convert your rands into a different currency and you don’t need to do the tedious paperwork of opening an offshore account. Better yet, you can invest in this ETF tax-free.
*Back in 2016 there were only three. Today we have the Ashburton World Government Bond ETF, the Stanlib MSCI World Index ETF, the Satrix MSCI World, the CoreShares Global Dividend Aristocrats ETF, the CoreShares S&P Global Property ETF and the Ashburton Global 1200 Equity ETF
Weekly expert: Mike Brown
Every week we ask an independent expert to explain what differentiates the featured ETF from all others, what limitations to be aware of and what type of portfolio would most benefit from holding the featured ETF. Mike Brown from etfSA.co.za tells us what he thinks about the SYGWD.
What differentiates the SYGWD ETF from other ETF products?
This ETF offers the opportunity to invest in the major global stock markets. It gives the investor the opportunity to own a little bit of every main listed company across all the developed economies. The ETF is a pure rand hedge, as it trades in rands on the JSE, but offers direct exposure to a global portfolio of equities.
It is listed as an “inward investment” on the JSE. This means that it’s classified as a rand denominated investment, even though it offers a portfolio of only international equity assets. The inward investment categorisation ensures that there are no foreign exchange control restrictions or allowances required, nor any tax clearances for individuals, trusts or corporate investors to invest as much as they wish.
What limitations should investors be aware of?
The allocation to different countries in the Sygnia MSCI World portfolio is based on market capitalisation, liquidity and free float considerations. This results in 57.8% of the portfolio allocated to the USA, followed by 12% in Europe, 8% to the United Kingdom, 9% to Japan and the balance to other developing nations, such as Canada, Australia and New Zealand. This asset allocation may not necessarily suit all investors, but does reflect the reality of global markets. There is no allocation to emerging nations such as China and other Asian nations.
What type of portfolio would benefit from holding the SYGWD?
This product is very suitable for investors seeking an exposure to global equity markets as it has wide diversification, comprehensive exposure to all economic and industrial sectors and is extremely tradable.
For investors looking to have a single exposure to global equity markets, the Sygnia MSCI World ETF is ideal, and it is also excellent as the core in diversification balanced portfolios.
|ETF Name||Sygnia iTrix MSCI World ETF|
|Issue date||1 April 2008|
|Benchmark||MSCI World Index|
|Tax-free savings||Can be included|
JP Morgan Chase & Co
Exxon Mobil Corp
Alphabet Inc A
Johnson & Johnson
Bank of America Corp
|Performance||1 year +22.6%
3 year +44.2%
5 year + 101.5%
|What we like||You can own the biggest companies in the world from the comfort of your own, local broker.|