An improved offering — Satrix funds reduce the cost of investing

2014-10-29 00:00

SINCE Sanlam bought out Satrix two-years ago, it has been implementing some interesting changes that have improved the offering to investors wanting to access low-cost passive index funds.

Satrix offers exchange traded funds (EFTs) that allows retail clients to track stock market performance at a relatively low cost. Investors purchase the ETFs either through a stockbroker or invest via the Satrix Investment Plan for monthly investments or a minimum lump sum of R1 000.

The underlying fund management costs are relatively low (around 0,5%). However, there is a 0,7% administration fee for using the Investment Plan, which brings the total costs to over one percent per annum.

By utilising the Sanlam unit trust platform, Satrix now offers index tracking unit trusts that also track the average performance of the stock market, but which reduce the monthly administration costs.

Investors can access many of the indices offered by Satrix ETFs through the unit trust platform; for example the Satrix Top 40 Index Fund, Satrix Dividend Plus Index Fund, Satrix RAFI 40 Index Fund and MSCI World Equity Feeder Index Fund. The total cost for the underlying fund fee and administration is 0,6% per annum, making it one of the most cost effective investment options for someone wanting to invest R500 per month or a lump sum of R10 000.

Satrix has also created blended index portfolios on its unit trust platform.

The Satrix Balanced Index Fund provides investors with exposure to all major asset classes, including offshore, and last month Satrix launched the low equity balanced index fund.

Both of these funds can be used in retirement funds. Satrix aims to launch a low-cost retirement annuity later this year and there are also plans to launch new international feeder funds.

The Satrix range of exchange traded funds remain a good option for investors who wish to invest in a diversified portfolio, as well as for investors who wish to invest lower amounts — the minimum monthly investment for a Satrix ETF is R300, with a minimum lump sum of R1 000.

Unfortunately, for investors who wish to invest smaller amounts, they are still mostly limited to life wrapper products such as endowment policies that carry higher costs and can be inflexible.

This could change with the introduction of tax-free savings vehicles expected next year. National Treasury has made it clear that products that charge penalties for early cancellation, such as endowment products, will not qualify for the tax-free status.

Liberty has indicated it is reviewing possible product options to meet this need.

David Lloyd, managing director of Liberty Investments, says it is possible to deliver an investment platform that can provide tax free investments using the new government tax free savings plan from as little as R50, while keeping costs low. It would also allow for ad hoc payments for people who cannot commit monthly contributions.

Lloyd says such an investment platform would allow customers to decide what level of advice they required and pay fees accordingly.

The lowest cost would be a simple proposition of one product, the choice of two or three funds and no advice. There could also be a limited advice version with more products, slightly more fund choice and also investment tools such as portfolio selection and tracking to goals, with fees linked to providing that advice.

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