Sygnia, the low cost financial services group founded by Magda Wierzycka, plans to launch a raft of new funds over the next 12 months as it works towards a long term goal of growing the passive portion of its assets under management to more than 50%.
Sygnia, the low cost financial services group founded by Magda Wierzycka, plans to launch a raft of new funds over the next 12 months as it works towards a long term goal of growing the passive portion of its assets under management to more than 50%. The Cape Town headquartered firm will roll out three new exchange traded funds ETEs targeting investors seeking exposure to emerging markets, the healthcare sector and international investments with an environmental, social and governance theme by end June, Sygnia CEO David Hufton told Business Day.
Sygnia is also in the process of developing an alternative asset class fund that will provide exposure to international venture capital and private equity opportunities, where returns are uncorrellated with the general market. A separate SA focused infrastructure fund will invest in project-related debt instruments, Hufton said.
The first of the three proposed ETFs will probably be launched "in the next six to eight weeks" with the other two following shortly thereafter, he said. The international alternative asset class fund and the SA infrastructure fund are at early stages of development and are expected to be launched within the next 12 months.
"There is a rising demand for infrastructure so that is a space we are looking at getting into locally and injecting some of that flavour into our product lineup," Hufton said.
But for venture capital and private equity, "our focus is more offshore. We've already entered that space with our Oxford Sciences Innovation Fund and there is more innovation ahead of us in alternative investing."
Sygnia oversees more than R250bn in assets under management AUM . The company's shares have surged more than 84% since the start of last year as its mix of index-tracking and multi-managed funds delivered a 64% jump in after tax profit for its 2020 fiscal year despite a volatile market.
Passive investing strategies, which buy shares in proportion to their weighting on an index, are becoming increasingly popular with investors across the world thanks to their lower cost structures. n SA, index-tracking products are outperforming their actively managed rivals.
The S&P indices versus active SA scorecard shows that 95% of domestic equity funds underperformed the S&P SA 50 index by 3.3% annually on an asset-weighted basis over the past five years.
"Our pure passive AUM at the moment makes up about one third of our overall AUM," Hufton said. "We would like to see that way north of 50% of our AUM."
etfSA, a platform offering investors the complete range of ETFs available on the JSE, said in November that while exchange traded products constitute just 4.5% of the R2.54trillion in assets overseen by SA's unit trust industry, their market capitalisation has grown 614% since 2008. By contrast, AUM in domestic unit trusts have grown 283% over that same 12 years.
"Investors are beginning to appreciate that index-tracking has delivered consistently better performance than the more expensive active management options," Hutton said. "We don't have a growing savings pool in SA, so we are seeing the older and bigger players experiencing net outflows. That will persist if they continue to overcharge and underperform."
Publication: Business Day
Date: Monday, February 22, 2021