The decision will allow the local bourse — which has recently faced a spate of company delistings — to take advantage of growth in ETF listings and trading.
An ETF is a listed investment product that tracks the performance of a group or a basket of shares, bonds or commodities. Actively managed ETFs, however, have teams making decisions on their underlying portfolios.
The fund managers who run actively managed ETFs choose shares and make regular trades to generate returns for investors. This means they do not adhere to the passive investment strategies of index-tracking ETFs.
Valdene Reddy, the director of capital markets at the JSE, said the decision marks “an important change that will allow institutional and retail investors an opportunity to develop beneficial investment strategies”.
“There is rising appetite locally for listed actively managed ETFs,” Reddy explained.
“This is in line with international trends where demand for active ETFs is growing and is expected to significantly surpass the current $300-billion in assets under management in the coming years.”
According to New York-based investment banking company Brown Brothers Harriman, active ETFs represented about 10% of global net inflows in 2021.
“While markets like the US have seen growth in active ETFs over the past decade, these products are nascent in other geographies such as greater China, where regulators are evaluating the opportunity to expand product strategies in actively managed ETFs,” the firm noted.
In its statement, the JSE noted that the bourse has seen significant growth in ETF listings and trading. The actively managed ETF listing regulations amendment is expected to increase the offering and the number of ETF listings on the JSE, the statement added.
“Most importantly, ETFs, both passive and active, offer investors an opportunity to diversify their portfolios cost effectively. There is a significant trend internationally, especially in the US and Canada, to list actively managed ETFs. The first actively managed ETF in the US market listed in 2008 and, to date, there are more than 1000 actively managed products listed across the globe.”
According to the JSE’s 2021 integrated annual report, released last month, there were 25 delistings last year. This was largely the result of mergers and acquisitions, as well as schemes of arrangement in mostly small- to mid-sized counters, the report noted. In the same period, there were only eight new listings.
However, the number of listed ETFs increased from 76 to 85, with market capitalisation exceeding R114-billion.