HISTORY SHOWS UP PASSIVE ETFs in SOUTH AFRICA

Welcoming in 2009

Again we are at the start of another year and look forward to a guaranteed event-filled 2009. We wish all our clients the very best for this year.

We do believe it’s going to be a difficult year for the globalised world, but we feel optimistic about the opportunities for personal growth. Besides it’s not all doom and gloom. What’s bad for the globalised economy is good for the environment; less production = less pollution, less consumption = less waste, etc. It seems that exchange controls and the National Credit Act have gone a long way in shielding us from the global economic meltdown, so let’s give credit where credit is due (economic joke). This doesn’t mean we won’t be affected, it means it could have been a lot worse.

History shows up passive Exchange Traded Funds In South Africa

Much has been written about the virtues of Exchange Traded Funds [ETFs] in the context of superior performance and lower costs. Silke Financial Services believes that, in the South African context, a passive index tracker fund [known as an Exchange Traded Fund] should only form a small part of a diversified long term portfolio. The reasoning for our view is that in the South African context tracking the Top 40 Index is a high risk game as this index is heavily weighted towards resource-based stocks and passive managed funds cannot asset allocate away from non-performing sectors: this past year has seen resource stocks being decimated as commodity prices have declined to extremely low levels.

For the past number of years we have been advocating the utilisation of actively-managed funds, which are backed by intensive research and managed by highly qualified fund managers. Take a look at the figures below to compare a couple of actively managed funds to four Satrix Funds over the past 3 years.

The above figures clearly illustrate the virtues of active management in the South African context.

Silke Financial Services has the skill and expertise to construct a well diversified portfolio to suit all risk profiles according to a client's investment time horizon.