ETFs perform well but investors are cautious

If you’re a fan of exchange-traded funds (ETFs), you’ll be interested to know that the Satrix INDI 25 ETF continues to outperform other index-tracking products in the local market.

According to the etfSA Performance Survey — which is updated every month and looks at total return over the period one month to five years for index tracking unit trusts and ETFs — the INDI holds a clear lead, with a return of 17.63% each year over the past five years, a 32.66% return over the past 12 months and 7.88% over the past three months.

The NewFunds eRAFI INDI 25, which tracks a basket of 25 local industrial shares using fundamental indexation, has produced above-average total returns, too (27.75% over one year and 6.75% over the past three months).

This shows that funds that track the FTSE/JSE industrial sector have rewarded their investors; another prime performing area of the equity market it the property sector. The Prudential Enhanced SA Property Tracker Fund, which is a unit trust, is in the top three funds for both the five-year and three-year periods.

The Proptrax ETF, which uses purely beta methods of exactly tracking the SAPY index, has closely mirrored or exceeded the performance of the other property unit trusts, which use more active portfolio selection methods, and remains a good option for investors seeking exposure to this asset class.

etfSA’s managing director, Mike Brown, says it’s puzzling that retail and institutional investors are relatively uninterested in these products, given the solid performance of equities, as shown in the survey.

It seems likely that investors have shown a preference for money market and fixed-interest funds because they’re perceived to be safer than equity investments (more risky, more volatile). But investors should consider long-term capital growth — time in the market can certainly make a difference.

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