The outlook for SA's four popular investment instruments

As 2020 draws to its bitter close, some respite may lay ahead for local stocks and bonds. The drive to list a diversified basket of offshore-focused exchange-traded funds will likely continue unabated. And the rand? Lest we burn our fingers in ever predicting our volatile currency.

- Simon Brown

EXCHANGETRADED FUNDS

Surge in offshore as ETFs come of age

Exchange-traded funds (ETFs) remain the cornerstone of most investors’ portfolios – and 2020 saw the offering of offshore ETFs growing. Several new ones, including global bonds, China, and two environmental, social, and governance (ESG) ETFs came to the market. The key point here is the ease of investing in offshore ETFs, and specifically offshore technology ETFs, which enabled local investors to benefit from the surge in technological stocks. These tech-ladened ETFs saw returns of around 50% for the year, while vanilla global and US-focused ETFs returned around 20% for the year. This beat the local top-40-focused ETFs, which only managed a much more modest single-digit return. This is not bad considering the pandemic, but well behind the global ETFs. (Suffice to say that the Satrix Top 40* celebrated its 20th year on the JSE in 2020.) This is hugely significant for local investors as, just a decade ago, offshore exposure was hard and expensive – now it’s just a few clicks away in your local online share account.

These tech-ladened ETFs saw returns of around 50% for the year, while vanilla global and US-focused ETFs returned around 20% for the year.

Looking towards 2021, we can expect more offshore ETFs to be listed. They will likely focus on single countries and regional areas. I think we’ll probably also start seeing some more offshore, smart-beta ETFs.