Maximizing Your Portfolio with ETFs and AMETFs

We recently had an insightful conversation with ETFSA Strategy Director, Gareth Stobie and Carel Nolte, Chief Enablement Officer at EasyEquities, to dive into the world of ETFs and Actively Managed ETFs (AMETFs). Gareth broke down the basics, explaining how these two types of investment vehicles differ and how they can both benefit your portfolio. This blog aims to help you ask yourself: Do I need both ETFs and AMETFs in my portfolio? Should I give them a try? What should I expect from them? Read on to find out more.

How Are They Different Really?
At its core, an ETF is a collective investment scheme (“CIS”). It’s a well-governed and highly recognizable savings vehicle. The key difference to other CIS instruments lies in an ETF’s structure: an ETF is listed on the stock exchange and trades like a share. Instead of dealing with traditional paperwork, investors can easily buy and sell ETF shares through platforms like EasyEquities.

When ETFs first came to market in South Africa, they were solely used to track a specific index, such as the JSE Top 40 in South Africa or the S&P 500 in the United States. This replication approach, known as passive investing, simply involves trying to replicate the return profile of an index. It’s a straightforward, cost-effective strategy, with some ETFs like the Satrix Top 40 offering extremely low fees.

The ETF market has thrived over the years, with dozens of listings across various asset classes and regions. However, as investors' needs have evolved, so too have the products themselves. Over time, the rules and regulations governing ETFs have become more flexible, allowing for greater sophistication in investment strategies.

The JSE announced in 2022 that it has amended its listing requirements allowing for the trading of actively managed ETFs. This change broadened the potential ETF investment universe by allowing ETF’s to investment according to their mandate. These ETFs still trade on the stock exchange like traditional ETFs, but they come with the added benefit of active management.

Actively Managed ETFs, or AMETFs, offer investors the potential for higher returns by leveraging the expertise of fund managers. Depending on the complexity of the strategy and the level of active management involved, the fees may vary. Investors should be mindful of the underlying investments and the associated costs when considering these products.

The Unique Benefits of Actively Managed ETFs

One of the key takeaways from the discussion was the unique advantages that AMETFs offer. Gareth explained that certain asset classes, like fixed income, can be particularly challenging to index. Parts of the bond market, such as credit markets, simply don’t have indices. This is where Actively Managed ETFs come into play, providing access to these difficult-to-index areas.

Another benefit is the ability to access specific investment styles and expertise. For instance, you might come across active managers who follow a value investing style. With an Actively Managed ETF, you can tap into that particular approach, like having a value-focused ETF that is actively managed to seek out the best opportunities.

Gareth also highlighted the outcome-driven nature of these ETFs. When investing in individual ETFs, you might not always have a specific goal in mind. However, by combining different ETFs into a portfolio, you can tailor your investments to match your personal circumstances, timeline, and end goals, making your investment strategy more outcomes-oriented.

Balanced Foundation Prescient AM-ETF
One of the exciting developments discussed was the launch of the ETFSA Balanced Foundation Prescient AM-ETF, a market-first AMETF designed to blend stability with long-term growth. Gareth emphasized that this AMETF aims to create a simple, well-balanced, and diversified portfolio that can serve as the foundation of your savings plan.





To know more about the recently launched Balanced Foundation AMETF, you can check it out here. You may also watch the full webinar below.

You can also find and compare all local ETFs by performance, size, risk, asset class, strategy and more by using our EasyCompare tool.

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