ETFs Steer Steady As Markets Roil

Although the economic fallout of the coronavirus pandemic hasn’t left investors in exchange-traded products or the underlying funds Unscathed, the market continues its upward trajectory

- Jaco Visser

The allure of exchange-traded products (ETPs) rose as world equity markets swung ferociously between deep losses and record increases in the aftermath of the coronavirus-induced panic at the end of March.

The total assets under management rose by almost 16% between the end of March and the end of June – to R106.6bn from R91.7bn, according to data collected by etfSA.co.za (etfSA). A decade ago, at the end of 2010, total assets under management totaled R32.2bn.

According to Mike Brown, managing director of etfSA, this second-quarter surge was mainly due to market price movements. “The growth in the size of the local ETP industry has been due to the recovery in prices of many of the markets and assets tracked, rather than because of new capital raised by the listing of new ETPs, or the issue of new shares or ETP securities already listed on the JSE,” he said with the release of the data in July.

The economic fallout of the coronavirus pandemic has, however, not left investors in ETPs or the underlying funds unscathed. Coupled with the delisting of three large exchange-traded notes (ETNs) by Deutsche Bank, total capital issued and redeemed showed a net decline of R6.2bn in the three months through June.

Taking a longer-term view, though, it seems that the demand for ETPs remains solid.

“We are seeing ongoing, consistently increasing demand for exchange-traded funds (ETFs),” Vicki Tagg, head of indexation at Ashburton Investments, tells finweek. “This has been driven by regulatory pressures, demand for lower cost-efficient products with greater transparency, and the global trends towards growth in ETFs.”

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