The Stanlib SA Property Index (STPROP) ETF tracks the the FTSE/JSE SA Listed Property Index. This index tracks the performance of the country’s 20 biggest property companies. This ETF’s former competitor, the CoreShares Proptrax SAPY (PTXSPY) will soon be merged with the CoreShares Proptrax Ten (PTXTEN), making the Stanlib product the only ETF that tracks this index. This index is weighted by market capitalisation.
Investors can expect a quarterly dividend payout, making this a great choice for income investors. It is important to note that income from property investments are not taxed at the usual 20% dividend withholding rate, but rather at an individual’s income tax rate. Income from this ETF could therefore potentially push investors into a higher tax bracket. Tax-free investment accounts are ideal vehicles to circumvent the tax issue. Portfolios in need of asset diversification could also benefit from holding this ETF.
In a tough economic environment people tend to prefer renting property over owning, which could benefit residential property companies. However, companies that specialise in office space rentals, especially in upmarket areas, might struggle with occupancy during challenging economic times. Similarly, businesses in malls could fail and close down as consumer spending slows, affecting property investment companies in the retail space. The annual lease escalation most property companies implement might also be up for negotiation in a difficult market. It is important to note that the majority of the companies represented in this index operate in the retail, office and industrial sectors.
“There are a number of factors that will influence this decision:
- Pricing: this is the obvious choice. Investors playing in the ETF space are generally cost conscious. Pricing is especially important as the funds are very similar, so pricing is likely to determine the winner over time.
- Investment wrapper: this is a fancy industry term for financial product. There are a number of products that investors can invest in: endowments, tax-free savings accounts, retirement annuities, preservation funds, flexible investments, etc. Within each product the investor will have to choose a fund (such as STPROP) or combination of funds. The investor will need to see what other funds are available within the different product wrappers, and then choose the most appropriate product for them. They will then have to consider the product wrapper fees, as well as the suitability of the fund choice for their own objectives.
- Ease of doing business: one consideration in choosing a product wrapper, and then fund, will be the ease of doing business going forward. Can the investor transact online? Can they top up the existing investment easily? How quickly can they make withdrawals?
- The manager: it is important to look at the two managers closely in deciding on the funds. The investor needs to satisfy themselves that the manager will likely be around in the future. If the manager is small and struggling, it may be worthwhile for the investor to choose the more stable manager. It often helps to look at who the shareholders are, which manager is experiencing higher growth, and what their respective assets under management is.”
|ETF name||Stanlib SA Property ETF|
|ETF JSE code||STPROP|
|Issue date||13 February 2013|
|ETF benchmark||FTSE/JSE Africa SA Listed Property Index|
|Tax-free savings account||Investment allowed|
|ETF holdings||STANLIB SA Prop Exchange Traded Funds|
|What we like||Easy-to-use local property exposure|
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