BUSINESS MAVERICK: Index investing’s new passive-aggressive strategy

A selection of 100 and 200 South African rand banknotes, featuring an image of former South African President Nelson Mandela, stand in this arranged photograph in London, U.K. Photographer: Simon Dawson/Bloomberg

It sounds like a personality issue, but actually, it’s a new investment strategy. In fact, its integration of two existing investment strategies, turning the debate between passive and active on its head. The ‘passive-aggressive’ approach is about integrating ‘factor’ investing and a passive approach. Too complicated? Possibly, but the first of these ETF funds are about to become available to investors, so it’s worth thinking about.

The methodologies of indexing keep on evolving. Since the launch of the first exchange-traded fund (ETF) in 2000, the Satrix TOP 40, investing in the performance of indices has taken off with a vengeance.

An ETF is an investment fund that replicates, duplicates or simply follows the movements of an underlying index, well, anything really; a class of stocks, a commodity price like gold, a segment of an industry or an entire economy. They are designed to mechanically follow in the footsteps of their target markets, with little or no discretionary input by physical fund managers.

Its an approach that has been embraced around the world and ETF markets are pumping. The global industry is projected to double to more than US$10 trillion over the next five years. That is according to BMO Global Asset Management, which released its annual ETF Outlook Report in January It examines the ETF sector across the globe and highlights the trends expected to drive it. The investment space hit a record high of US$4.7-trillion assets under management at the end of 2018.

According to etfSA, the total SA market capitalisation of all ETFs and exchange-traded notes, listed on the JSE, amounted to R89.4-billion at the end of

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