ETF: Understanding SWIX ETFs

In ETF Blog, Latestby Kristia van Heerden

Shareholder-weighted index (SWIX) trackers are weighted by ordinary shares held in the South African share register. Shares in these blue chip companies held by other companies don’t form part of the weighting of the index, neither do shares held by offshore investors. Since these products are weighted by shares held locally, liquidity is a built-in feature of the product.

In the local market, there are four SWIX ETFs to choose from, all of which track the FTSE/JSE SWIX Top 40 Index. It’s worth noting that the NewFunds SWIX 40 is a total return ETF, so all dividends are automatically reinvested in the ETF.

Galileo Capital’s Warren Ingram explains what separates these ETFs from their vanilla Top 40 counterparts.

“The most well-known investment index in South Africa is the JSE Top 40 index, which consists of the 40 largest listed companies on the stock market by the size of their market capitalisation. Many investors have bought this index via a Top 40 ETF.

One of the main criticisms of this index has been the impact of foreign shareholders on this index as they tend to be more volatile than local shareholders. This is why the SWIX index was created. According to the JSE, the Shareholder-Weighted Index has the same underlying companies as the Top 40 but the allocation to each company will differ because SWIX only includes local shareholders in the index calculation.

Currently this index has provided some interesting allocations to individual companies. At present, the SWIX index allocates more than 29.5% of the entire portfolio to one share, Naspers. In contrast, the Top 40 has more than 22.5% in Naspers. The result of this allocation means that SWIX investors are benefitting from Naspers’ very strong share performance. However, the risk of a capital loss if Naspers drops is naturally greater for SWIX investors. If your only investment is an ETF that is invested in the SWIX index, you have nearly a quarter of your wealth invested in only one share – personally, I feel this is a big risk for any investor to take.”

 

ETF Absa Newfunds SWIX 40 Satrix SWIX Stanlib SWIX40 Sygnia SWIX 40
Share code NFSWIX STXSWX STANSX
SYGSW4
TER* 0.37% 0.44% 0.29% 0.16%
Performance 1 year -0.4%

3 year +8.7%

5 year +22.3%

1 year -4.3%

3 year +0.4%

5 year +8.2%

1 year -4.3%

3 years +0.4%

5 years +7.4%

1 year -5.1%

3 year n/a

5 year n/a

Dividends Dividends reinvested 2.5% 2.1% 2.7%
Market cap* R23m R376m R1.8b R209m

*2019

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