Satrix Top 40

ETF: Understanding the Satrix 40

In ETF Blog, Latest by Kristia van Heerden

We originally featured the Satrix 40 (STX40) ETF in February 2016. Since then Satrix launched the SatrixNOW platform and Satrix 40 became the cheapest ETF on the market. The company introduced a hard cap of 0.1% on the STX40 total expense ratio in October 2017.  The STX40 won the People’s Choice Award at the inaugural South African Listed Tracker Funds Awards.

The market is also a different beast. Back in 2016, SABMiller was the ETF’s biggest holding at 16.61%. That company is now part of the ABInBev group, which is not included in the Top 40 index. Steinhoff represented 3.43% of the index. That company has now fallen out of the index.

TIP: Not entirely sure what an ETF is or what it has to do with you? We explain it all here.

As the name suggests, the Satrix Top 40 tracks the performance of the 40 biggest companies listed on the JSE by market capitalisation. We determine market capitalisation by multiplying the company’s share price by how many of that company’s shares are traded on the stock marketWhen you buy the Satrix Top 40 ETF, you make money when the bigger companies in the index do well. Sadly you’re also along for the ride when those same companies do poorly. We explain that here

When we first featured this ETF, Naspers was the second-biggest company in the index, representing 13.97% of the ETF. Today, that same company takes up nearly a quarter of your investment, representing 23.15% of the index. That means R23.15 of every R100 you invest buys Naspers shares. If the company’s share price goes up by 5%, your R23.15 is worth R24.30. You make a profit even if every other company in the ETF does nothing. Compare this with Investec – still the smallest company in the Top 40 at 0.43%. Even if the Investec share price doubles, less than R1 of your R100 investment will be invested in that company. That’s bad news if the company does very well, because it’s so small that you don’t get to benefit from its growth. However, if the Investec share price halved, having a tiny holding protects your money.

Weekly expert: Eugene Chemaly

Every week, we ask an independent expert to explain what sets the featured ETF apart from all others. This week, Eugene Chemaly from Afrifocus delves deeper into the Satrix 40 ETF.

What differentiates the Satrix 40 from other ETF products?

“The Satrix 40 is one of the oldest and most well-known ETF products. It’s different to other ETF products because of its strong brand presence and its ability to give investors an easy-to-understand return. When investors talk about ‘buying the market’ the Satrix 40 is one simple way of doing it. By tracking the index it differentiates itself from many other ETF products because it gives the investor a completely diversified portfolio with exposure to all the major sectors such as resources, industrials, retail, financial and telecommunications.”

What limitations should investors be aware of?

“The Satrix 40 is designed in such a way that it tracks the weightings of the Top 40 companies as closely as possible. So, if a company accounts for 10% of the market cap of the Top 40 companies, this ETF is forced to hold a similar percentage weighting. This could have a large, negative impact on your portfolio should this single share drop in value. Of course, the opposite is true. If this share rises significantly it will be great for your portfolio. Overall, because the Satrix Top 40 holds so many companies it is well-diversified.”

What type of portfolio would benefit from holding the Satrix Top 40?

“This ETF is great for investors who are willing to buy and hold this portfolio for the long term. It has provided excellent capital growth and because it holds so many companies with local and foreign earnings, and it gives you excellent risk reduction through diversification.”

The Satrix 40 unpacked

ETF name Satrix Top 40
ETF JSE code STX40
ETF issuer Satrix
Issue date 27 November 2000
ETF TER* 0.1%
ETF benchmark FTSE/JSE TOP 40
ETF major holdings Naspers, BHP Billiton, Richemont, Anglo American, Sasol, Standard Bank, Firstrand, MTN, British American Tobacco, Old Mutual. View the full constituent list here.
Market cap* R6.4bn
Performance* 1 year +6.4%

3 year +9.7%

5 year +38.9%

10 year +99.0%

Dividends* 2.4%*
What we like The Satrix 40 is as simple as investments get. It’s a true passive product, so investors never have to guess what they’re getting.

* 31 July 2018

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