Today is twenty-five years since the first Exchange Traded Fund (ETF) listed on the JSE.That was the Satrix40 (JSE code: STX40)*, which tracks the 40 largest stocks on the exchange.
In 2000, I had just launched South Africa’s first derivative trading website SAWarrants, and was happily trading warrants and working in the publishing industry, while building my share portfolio and SAWarrants.
I read an article about this new product coming to market – an ETF to be issued by Satrix.
At that time Satrix was a joint venture between the JSE, Gensec Bank and Corpcapital and headed up by Mike Brown (who left in 2010 to start ETFsa).
Index trackers were not new to the world – in 1976 Jack Bogle and Vanguard launched the First Index Investment Trust (now the Vanguard 500 Index Fund) tracking the S&P500. The first index tracking portfolio dates back to 1971 – created for Samsonite’s pension fund by Wells Fargo Bank and tracking the NYSE.
ETFs as we know them now, launched in 1990 tracking 35 stocks on the Toronto Stock Exchange. The famous SPDR S&P 500 ETF first listed in 1993.
Back in 2000 I knew nothing about ETFs, but I did have online friend of German decent living in Hong Kong. He had helped me understand warrants, so I asked him. His reply was simple: They’re great – buy them.
And so I did, applying for the Satrix40 IPO. The IPO raised some R2.6billion and the price on the first day was 774c. Today, the same ETF trades at over R100 with total dividends paid since listing of 2699.18c
That’s a compounded annual growth rate of ±12%, some 7% ahead of inflation over the same period.
I still hold those ETFs, and I’ve continued to add to my Satrix40 in addition to other ETFs. We now have a vastly wider range – almost 90 passive ETFs and over 30 active ETFs.
Over the years Satrix became 100% owned by Sanlam, and we’ve seen issuers come and go; but low fees and simple diversification are still at the heart of the local ETF industry. Buying one simple product that promised market returns at a low fee was a game changer compared to over charging and under performing active managers.
That November 2000 listing changed the local investment landscape with the introduction of tax-free investing in 2015 being another leap forward.
Here’s a Power Hour video I did with Mike Brown at the twentieth anniversary of the Satrix40 listing.
ETF blog
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.
