ETFs as a source of Income · ETFs as a source of Income June 2013 ... Retail Investors Websites...
15
ETFs as a source of Income June 2013 PRESENTED BY GARETH STOBIE
Transcript of ETFs as a source of Income · ETFs as a source of Income June 2013 ... Retail Investors Websites...
ETFs as a source of Income
June 2013
PRESENTED BY GARETH STOBIE
Introduction to Grindrod Bank’s ETF suite:
Tax efficient, 7.48%
No long term growth to income stream
Preference
Shares
6.95% taxable
Long term growth to income stream
Property
Grindrod: Exchange Traded Products
Your share of the South African listed property market
Liquid and cost effective
Growing income stream > 6%
Tangible investment secured by ‘bricks and mortar’
Regulated and transparent
Historical performance
PROPTRAX : PROPERTY ETFs
(20)
(10)
0
10
20
30
40
50
60
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Income Price
Average annual income
return 11.01
Listed Property Returns and How They are
Derived?
Average annual returns: 26.08 percent
Average annual income: 11.01 percentage points or 43 percent of total return
Source: I-Net
Scorecard
SA Short Rates + Notwithstanding recent spike in bond yields,
generally low yields set to continue
SA Property Fundamentals 0
Industrial and retail doing well
Office continues to struggle
Forecast 6-8% pa distribution grow next 2-3 years
SA Valuations 0 Recent pull-back healthy for the market but yields
remain below historical average
Funding + Extremely low funding rates available to property
companies
Demand / Supply for SA
Listed Property 0
REIT legislation to be positive for sector
Numerous new issuances pose some supply side
risk but the issues remain over-subscribed
TOTAL + 2 Mildly positive outlook
Property Prospects
Investment Portfolio Portfolio with Property
Stocks 60.00% 50.00%
Bonds 30.00% 30.00%
Cash 10.00% 10.00%
Listed Property 0.00% 10.00%
100.00% 100.00%
10 Years, annualized
Return 16.80% 17.33%
Risk 10.40% 9.78%
Risk vs. Return : An Investors Quandary?
SAPY TEN
Index SAPY Customized, top ten
equally weighted
Yield(1) 6.78% 7.12%
Size R108m R141m
Share PTXSPY PTXTEN
1 Year(2) 26.0% 21.9%
3 Year(2) 21.6% n/a
PTX TEN & SAPY
Source: I-Net
(1) As at 14 June 2013
(2) Source: SIM. Performance annualised, gross of fees
Do Large Funds Become Expensive Index
Trackers?
Large local actively managed property CISCA fund
> R5billion AuM
TER: 1.49%
SAPY Large Fund
80
100
120
140
160
180
200
Rebased to
100
Source: I-Net as at 1 June 2013
SA’s Preference share ETF
Hybrid investment: part Equity, part Debt
High yielding 7.48% fixed income investment
Significant pick-up in after tax yields relative to cash
Tax efficient (max DWT @ 15%)
Comparable to bonds and cash but must invest > 12 months
Very attractive after surprising pull back in valuations
Prefs vs. Cash since start of Financial Crisis
90
100
110
120
130
140
150
160
170
Jul-0
8
Sep-0
8
No
v-0
8
Jan-0
9
Ma
r-0
9
Ma
y-0
9
Jul-0
9
Sep-0
9
No
v-0
9
Jan-1
0
Ma
r-1
0
Ma
y-1
0
Jul-1
0
Sep-1
0
No
v-1
0
Jan-1
1
Ma
r-1
1
Ma
y-1
1
Jul-1
1
Sep-1
1
No
v-1
1
Jan-1
2
Ma
r-1
2
Ma
y-1
2
Jul-1
2
Sep-1
2
No
v-1
2
Jan-1
3
Ma
r-1
3
Ma
y-1
3
J251T STFIND
53%
23%
Rebased to
100
On an after tax basis the J251 has outperformed the Stefi
Source: I-Net as at 07 June 2013
Buying Opportunity in Preference Share Market
Source: I-Net as at 07 June 2013
850
900
950
1000
1050
1100
1150
1200
1250
1300
Jul-0
8
Sep-0
8
De
c-0
8
Feb
-09
Apr-
09
Jul-0
9
Sep-0
9
No
v-0
9
Jan-1
0
Apr-
10
Jun-1
0
Aug-1
0
No
v-1
0
Jan-1
1
Ma
r-1
1
Jun-1
1
Aug-1
1
Oct-
11
Jan-1
2
Ma
r-1
2
Ma
y-1
2
Jul-1
2
Oct-
12
De
c-1
2
Feb
-13
Ma
y-1
3
2011 Budget speech
changes to tax regime
2012 Budget speech
adjust DWT rate from
10% -15%
BATP (1.5bn)
IVTP (750m) MAQP1 (125m)
Financial Crisis
J251Avg
Moving Avg J251, 200 day
J251[Cl]
The J251 Preference Share Index is currently priced 3.23% below the average price since
inception
Scorecard
Interest Rates - Prime remains at historical low and likely to
remain so for now
Valuations +
Yield relative to asset class historical yields and
relative to other Fixed Income asset classes is
very competitive
Regulatory/strategic + Tax changes finalized, competing strategies
successfully challenged
Demand / Supply for listed
prefs 0
Recent issuances (Brait/Invicta) have put
pressure on market. No new issuances
announced
TOTAL + Positive outlook
PREFEX Prospects
Source: I-Net & Grindrod Asset Management, Performance annualised, net of fees
Index J251 (FTSE/JSE Preference share Index)
Yield 7.48%
Size R211m
Share PREFEX
Index construction Market cap weighted
(> 75% major banks)
1 Year 0.22%
PREFEX
Source: Source: BlackRock as at end of 2012
Core: Broad diversification by closely mirroring asset
class benchmarks
Consistent performance relative to a benchmark
Low costs
Improved risk management
Satellite: Precise exposure to a wide range of discrete
market sectors, specific styles or market capitalisations indices
Exposure to selected market segments at low costs
Eliminating security selection or manager selection risk
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ETF Usage Example: Core Satellite Strategy
Grindrod Securities Capital Markets
Taryn Mulligan
Telephone: +27 (0)31 333 6633
Fax: +27 (0)31 571 0505
Email: [email protected]
Chris Rule
Telephone: +27 (0)11 459 1846
Fax: +27 (0)11 388 2341
Email: [email protected]
Retail Investors Websites
Retail investors can transact through the etfSA
Investor Scheme
Telephone: 0861 3837 21
Website: www.etfsa.co.za
www.proptrax.co.za
www.grindrodsecurities.co.za
www.grindrodbank.co.za
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