[TOP STORY] The rise of retail investors and active ETFs in SA

Simon Brown (0:02)

MoneywebNOW, on the money.

This podcast is brought to you by Stanlib Asset Management. Invest in more certainty to navigate volatile market conditions. I'm chatting with Niki Giles, Head of Strategy Prescient Fund Services. Niki, I appreciate the time. If we look at ETF growth in South Africa, we've seen some fairly significant numbers. We're approaching, I think, 300 billion in assets and management. Recent piece you put out, you talk around how a lot of this growth is really coming from the retail investor.

Niki Giles (0:30)

Hi, Simon. Yes, thanks for having me. Yeah, we have been doing a small amount of research, but we're also quite active in the market. And what we're seeing is that there's definitely been an uptick over the last few years in retail investors accessing ETFs.

Simon Brown (0:46)

I mean, some of it is, I would imagine, as simple as it's the likes of, I suppose, easy equities, the Satrix Now, which is white labeling easy equities, but also tax-free must help, and maybe just sort of general retail investor awareness and sort of becoming smarter around product ranges.

Niki Giles (1:02)

Yeah, I think, you know, definitely the likes of ETFSA, the likes of easy equities, Satrix Now have all helped in the space, and making ETFs accessible to the retail investor. Because I think that was really the issue with why a lot of investors weren't going into ETFs, it was just pure access.

Simon Brown (1:21)

And part of it, I imagine, is advisors who my senses are perhaps a little more slow, and still very much on the unitrust bandwagon for, I mean, it's what they know, I suppose. They've got the list platforms, the trailing fee structure. Oh, advisors come into the party much yet, or they really are, as it seems, more in the unitrust space.

Niki Giles (1:39)

Look, I can't say that the advisors are slow from an uptake perspective. Maybe it's more a structural issue for them. So they don't necessarily have access for their investors, they're advising. And that comes down to changes that need to be made to some of these platforms that they use currently, like your list platforms that you mentioned.

Because ETFs can't trade easily on those platforms.

Simon Brown (2:02)

Absolutely. And it's part of the beauty of an ETF, is that trades on the exchange. But of course, that's a hinder for the advisor. What we've also seen is the rise of active ETFs, which I think we're now approaching three years, I think it was late 23 when they first came to market. We've seen a lot coming in that space, particularly so far in this year.

Niki Giles (2:21)

Yes, I think that's where a lot of this retail growth is coming from, and also why there's so much retail growth. And a lot of that is, I mean, we're looking at over 50 active ones that have been listed so far since 2023

And a lot of that has happened in this year, as you mentioned. So if you look every month, there's one, maybe two new AMETFs being listed.

And a lot of those are also well-known names now that are coming to market. And so your investor who's used to those names in the unit trust space is now seeing them in the ETF space as well.

Simon Brown (2:54)

Absolutely. I mean, Coronation, Al and Grave, they're two big names. 91 has got some of the income unit trusts, which they're also doing actively managed ETFs. I imagine for them, you make the point, it's about brand, we all know the brands, and then it's about the distribution. Why not put it on to an actively managed ETF?

Niki Giles (3:11)

Exactly. So that, I think, from the asset manager's perspective is why you're seeing it. It's just another form of distribution for them.

So they're seeing that there are these DIY investors that are going via some of these new and near-broker platforms, et cetera, onto exchange-traded funds. So this is a way of them accessing those investors.

Simon Brown (3:29)

I mean, I can almost see a time that when a new unit trust is released, simultaneously do the active ETF. There's just no reason not to, I think, in many places. We also get a lot of range. I mean, we've got some CPI plus, we've got, of course, AI ones as well. We've got the just general multi-asset. It really is, in one sense, I was going to say, it's glorious for the investor. I suppose it can also, perhaps, for a newbie be a little overwhelming. But is that maturing where we are spoiled for choice?

Niki Giles (3:58)

Yeah, we are, but you must remember, it's also a very small universe. You know, when you look at the universe of unit trusts that are available, there's hundreds of them, probably over thousands of them. Whereas in the ETF world, as I said, the active one is only 50 So yes, it sounds like there's a lot of choice, but that's not really that many. And I think we will see more coming with more optionality, with more choice, more asset classes being included, different options for our investors, which is great for the brand of AMETFs. And I think it's almost a virtuous circle. The more you see them listing and the different types you see listing, the more they will create interest for investors and their advisors.