With little infrastructure options and no major global healthcare companies listed on the JSE, why not track a global index? Get exposure to 387 international companies when investing in the below listed ETF’s.
As Global markets keep reaching new highs and many stock valuations look expensive, and the US Federal Reserve looks at increasing interest rates to combat inflation, markets are poised for a correction hence investors should probably be a bit more selective this year with market risks weighing on the downside.
Why not look at these Rand Hedged ETF’s discussed below? Of course, don’t forget to consider Rand cost averaging by buying your units monthly.
Satrix Global Infrastructure Feeder ETF
As a feeder fund, Satrix’s Global Infrastructure Feeder ETF acts as a conduit for domestic investors to invest into the iShares Global Infrastructure UCITS ETF.
This offshore ETF invests in listed companies that develop, own, operate, manage and/or maintain structures or networks used for the processing or moving of goods, services, information/data, people, energy or necessities from one location to another. ‘Infrastructure’ has toll road-like characteristics, from literal toll roads to power generation to ports and even telecommunications and data centres.
While often capital-intensive to build, these assets are generally considered defensive with strong, steady free cash flows as their users often have few (or no) alternatives and are inelastic to price increases.
This ETF is made up of 52% in utilities, 25% in industrials and the balance in energy, real estate and communication. Over 63% lies in the US, 12% in Canada and the balance mostly spread across the developed world. Finally, the underlying 237 individual holdings have a price-earnings ratio of 25.9x and a dividend yield of 1.9% in US dollars.
With a total expense ratio (TER) of 0.78%, this ETF is somewhat expensive – but the defensive, yielding characteristics of its global makeup, makes it a unique offering in our local market with defensive, rand-hedge characteristics.
Sygnia Itrix Solactive Healthcare 150 ETF
This niche developed market ETF tracks the Solactive Developed Markets Healthcare 150 Index, which replicates the free float weighted performance of the largest 150 companies from the healthcare industry.
While the Covid-19 pandemic has highlighted the importance of the healthcare sector, it is also likely to lead to an innovation-led boom in this area – ranging from an explosion in mRNA vaccine uses to remote medical care and so on.
Traditionally, healthcare has a defensive underpin as it is often non-discretionary in nature with high regulatory barriers to entry.
Once again, despite the attractiveness of the healthcare sector, the JSE has relatively few healthcare counters to choose from.
Thus, tracking a global healthcare index allows an investor to gain the optionality of medical innovation while diversifying their local portfolio.
This ETF’s top holdings include UnitedHealth Group (5.6% weighting), Johnson & Johnson (5.5%) and Pfizer (4.1%), with 71.9% of its portfolio lying in the US and 8.2% in Switzerland.
Access these defensive and attractive ETFs through any product, whether a Tax-free Savings Account, Endowment or Retirement Annuity, even a Living Annuity, monthly or lumpsum investment.