INVESTMENT | ETFsETF
INVESTMENT | ETFsETF evolution: global and South Africantrends driving the future of index investingThe ETF market is evolving at an unprecedented pace, reshaping global investment landscapes.By the close of 2024, global exchange-traded fund (ETF)assets under management (AUM) hit US.85-trillion,marking a 17.1% compound annual growth rate (CAGR)over the past decade. South Africa is aligning with thistrajectory, witnessing mass inflows into ETFs and index-trackinginvestments. Satrix, the dominant player in the local ETFmarket, captured 72.5%* of all ETF flows in 2024, while itscombined ETF and indexed unit trust flows accounted for50.5%* of total indexation flows. According to Fikile Mbhokota,CEO of Satrix**, the group experienced 127% year-on-year ETFinflow growth from 2023 to 2024, adding nearly R5-billion ininflows and pushing Satrix’s AUM beyond R240-billion^ as ofDecember 2024.This exponential growth reflects a fundamental shift: investorsare embracing ETFs as core portfolio holdings, attracted bycost efficiency, transparency and liquidity. The move towardindexation is accelerating – over the past 12 months, indexedstrategies accounted for 87.8% of total industry net inflows.The structural shift away from actively managed funds highlightshow local investors are recalibrating their portfolios to align withglobal trends.Global ETF trends shaping 2025 and beyond1. Explosive growth in ETF savings plans. ETFs are becomingthe default investment vehicle for long-term savings, particularlyin Europe. ETF savings plans are projected to quadruple overthe next five years, according to BlackRock. This retail-driventrend signals a growing demand for automated, cost-effectiveinvesting, which could spill over into emerging markets likeSouth Africa.2. The rise of active ETFs. Active ETFs are outpacing traditionalmutual funds, particularly in the United States, with a staggeringUS-trillion flow gap in favour of ETFs. This shift suggeststhat investors are seeking the flexibility of active managementcombined with the efficiency of ETFs – a trend that couldsee local asset managers responding with more innovativeproduct offerings.3. Institutional acceleration in ETF adoption. ETFs are nolonger just a retail investment tool – institutional investorsare increasing their allocations to ETFs for their cost efficiency,liquidity and tactical portfolio management benefits. SouthAfrican pension funds and asset managers are expected tofollow global institutions in using ETFs for risk management,sector rotation and exposure to international markets.4. Thematic and alternative ETFs gaining traction. GlobalETF innovation is at an all-time high, with 1 787 new productETFs launched in 2024, a net increase of 1 234 after 553 closures.Cryptocurrency ETFs are experiencing robust asset accumulation,led by the iShares Bitcoin Trust.5. Regulatory tailwinds supporting ETF growth. Europe’sETF market is benefiting from regulatory frameworks, boostingtransparency and digitalisation.Breaking new ground“ETF adoption in South Africa will continue accelerating, drivenby both retail and institutional investors seeking cost-effective,globally diversified investment solutions,” says Mbhokota. Sheanticipates:• Stronger inflows into equity and fixed-income ETFs• A growing shift toward international diversification• Increased demand for innovative, crypto andactive ETFsAs South Africa’s financial ecosystem evolves,ETFs are becoming the backbone of modernportfolio construction, reinforcing their positionas a core component of investor strategies in2025 and beyond. *Sources: Satrix and Morningstar, 31 December 2024 | ^Satrix, 31 December 2024, AUM represents all assets managed in CIS vehicles(Satrix ETFs, unit trusts and UCITS), life pooled portfolios, assets managed via segregated mandates by Satrix as a division of SanlamInvestment Management and Satrix branded endowment funds managed by Sanlam Structured Solutions. **Satrix is a division of SanlamInvestment Management. Other sources used:• ETFGI• Morningstar• etfSA.co.zaFikile Mbhokota, CEO, Satrix• Introduction to ETFs: by State Street Global Advisers SPDR.• Goldman Sachs ETF Accelerator: The Growth of ETFs in Europe.Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities and an authorised financial services provider in terms of the FAIS. Collective investmentschemes are generally medium- to long-term investments. With Unit Trusts and ETFs, the investor essentially owns a “proportionate share” (in proportion to the participatory interest held in the fund) of the underlyinginvestments held by the fund. With Unit Trusts, the investor holds participatory units issued by the fund while in the case of an ETF, the participatory interest, while issued by the fund, comprises a listed security tradedon the stock exchange. ETFs are index tracking funds, registered as a Collective Investment and can be traded by any stockbroker on the stock exchange or via Investment Plans and online trading platforms. ETFsmay incur additional costs due to being listed on the JSE. Past performance is not necessarily a guide to future performance and the value of investments /units may go up or down. A schedule of fees and chargesand maximum commissions are available on the Minimum Disclosure Document or upon request from the Manager. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending.Should the respective portfolio engage in scrip lending, the utility percentage and related counter parties can be viewed on the ETF Minimum Disclosure Document. International investments or investments in foreignsecurities could be accompanied by additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potentiallimitations on the availability of market information. For more information, visit www.satrix.co.za.40 www.bluechipdigital.co.za
