In our latest ETFs in 2025 webinar with ETFSA, industry experts tackled the major themes for the year ahead and how investors can build resilient portfolios using ETFs. We were joined by a well-known investment and ETF guru, Nerina Visser, Strategist and Advisor from ETFSA.
Here are the top takeaways from the discussion.
Key Investment Themes for 2025
1. From Geopolitical to Geoeconomic Risks
- 2024 was marked by global elections, with over half of the world's population casting their votes. The political shifts have set the stage for economic policy changes in 2025.
- Investors should brace for market uncertainties stemming from new trade policies, inflationary pressures, and shifting interest rate expectations.
- The focus should be on wealth protection through diversified portfolios rather than chasing high-risk, high-reward stocks.
2. Technology Continues to Dominate
- While the "Magnificent Seven" tech giants remain dominant, investors should recognize the broader application of technology across industries, including fintech, health tech, and renewable energy.
- Most investors already have significant tech exposure through global and S&P 500 ETFs, making additional tech-focused investments a strategic decision rather than a necessity.
3. Higher for Longer: Inflation and Interest Rates
- Inflation has come down but is unlikely to return to pre-pandemic levels, especially in developed markets.
- The U.S. Federal Reserve’s rate-cut expectations have shifted dramatically, with some predictions suggesting rates could even rise in 2025.
- In South Africa, interest rate cuts could provide some relief, but global economic factors will heavily influence the local market.
Investment strategy: High-yield bonds and cash positions may be attractive hedges against interest rate volatility.
Building a Fit-for-Purpose Portfolio: Core & Explore Method
The Core & Explore strategy helps investors build a portfolio that balances stability and growth:
- Core: A strong, well-diversified multi-asset ETF forms the foundation.
- Explore: Investors can dial risk up or down by adding exposure to sectors like dividend stocks, real estate, gold, or emerging markets.
Actively Managed ETFs: What You Need to Know
Actively managed ETFs differ from traditional index-tracking ETFs in that they do not replicate an index. Instead, fund managers adjust the portfolio based on market conditions. Investors should check:
- Fund Objective: Does it align with your investment goals?
- Costs: Look at Total Expense Ratio (TER) and Transaction Costs (TC) to ensure you’re getting value for money.
- Transparency: Some ETFs disclose their holdings daily, while others are semi-transparent or fully non-transparent. Transparency is crucial for investors using a Core & Explore strategy.
Are Actively Managed ETFs Right for You?
While passive ETFs remain popular, actively managed ETFs are gaining traction, especially in multi-asset portfolios where index-tracking isn’t always effective. South Africa is seeing steady growth in this space, with products like:
- ETFSA Balanced Foundation ETF (ETF SAB) – A multi-asset balanced fund
- Satrix Multi-Asset Growth & Protect ETFs – Balanced SA equity-focused portfolios
- Easy Equities Balanced Fund ETF (ECBF) – A tactical asset allocation ETF
These funds provide actively managed exposure to various asset classes while maintaining the low-cost, transparent benefits of ETFs.
The Future of ETFs in 2025
The ETF industry is expected to see continued growth, particularly in AMETFs. As investors look for cost-effective, diversified, and flexible solutions, especially those that blend active and passive strategies, will play a crucial role in modern portfolios.
Want to learn more? Catch the full recording below.
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