Exchange Traded Funds (ETFs)  

Benefits

• Trusted investment vehicle
  • Introduced in the United States in 1993, ETFs have been a trusted feature of the South African investment landscape since 2000.
    
    By 2009 there were over 2 000 ETFs listed on stock exchanges in 42 countries worldwide, managing more than US$862 billion on behalf of investors. In South Africa, there are now more than 40 ETFs listed on the JSE with close to R100 billion in assets under management. Absa CIB is a dominant player with 16 ETFs from our asset classes (commodities, equity, fixed income, and money market) and close to 50% of the South African market capitalisation.
• Spreading the risk (Diversification)
  • ETFs are an effective and secure means of trading a basket of shares - index, sector or asset class - through a single transaction.
    
    With an ETF, you get instant exposure to a basket of securities, helping you spread your risk more widely. We believe that diversification, or spreading the risk, is the safest approach to ensure your investment portfolio performs as expected across a range of market conditions. Diversification helps in risk mitigation and can provide lower level of risk to your portfolio.
• Lower Costs
  • ETFs have a low fee structure because they aim to mirror the performance of an index (a passive fund), hence there is no stock selection process required, and the re-balancing is infrequent. These factors reduce the management expenses of running an ETF compared to an actively managed fund.
• Liquidity
  • ETFs are easy to buy and sell. This is referred to as being liquid. All ETFs have a Market Maker to ensure that liquidity is always maintained. If there is no willing buyer or seller at the other end of your trade, the Market Maker will always step in to be the missing counter-party.
• Convenience and Flexibility

  • ETFs offer exposure to broad markets through a single investment transaction and respond to market movements on securities exchanges throughout the trading day.

    ETFs are also easily traded, with investors buying and selling ETFs like shares, typically through a stockbroker account. Investors can also invest in ETFs through investment plans with accredited financial service providers, and through the Absa online portal (www.absa.co.za).

    Please click on the "How to invest" tab on the top of the page to find out more details on the different ways to invest in our ETFs.

• Transparency
  • The holdings of an ETF closely mirror the underlying index it tracks as a benchmark. These components are fully disclosed, hence you know where your money is invested.