ETFs beat actively managed unit trusts once again – but their growth has hardly started

For all the gnashing of teeth from active fund managers, South Africans are taking their time following the global trend towards Exchange Traded Funds, the lower cost, better performing passive alternative.

An update yesterday from ETFSA told us at the end of June, total assets held by SA's 74 ETFs is now a tad below R80bn. That's a fractional 5% of the unit trust industry; and way behind the biggest unit trust, Allan Gray's Balanced Fund, with assets of R131bn.

During the first half of the year, the best performing ETFs were in resources where precious metals-linked funds generated between 19% and 29% return. Equity-based funds gained modestly, mirroring the JSE All Share Index's 3.4%. They still bested the biggest unit trust which generated 2.9% for investors.

The key stat was these tracker funds' comparison against actively managed portfolios. In the six months to end June, only one in ten active funds beat the index; for the past year one in five. ETFSA says: "The hypothesis that active managers fare better in declining markets remains a fallacy." Relatively few investors the story. Yet.