Wednesday, July 18, 2018 UTC
Analysis > Interviews

Passive investing

Anna Lyudvig
Feb. 27, 2018, 5:21 p.m.

Word count: 628

AGF’s catches up with Zack Bezuidenhoudt, Head of South Africa and Sub-Saharan Africa, S&P Dow Jones Indices, to discuss index-based products and passive investing.   Anna Lyudvig (AL): How South Africa is positioned for growth and what are the ways that passive investing may contribute? Zack Bezuidenhoudt (ZB): The investment options South Africans have access to have increased dramatically over the last few years. More options in the passive space have meant that investors can now construct low cost strategies across multiple asset classes and styles of investing. S&P Dow Jones Indices (S&P DJI) has rolled out a range of plain vanilla and smart beta indices in South Africa that serve as the underlying for ETFs and index funds. S&P DJI introduced the SPIVA® South Africa Scorecard three years ago to show how active funds have performed against its respective S&P indices. The SPIVA® Scorecard is an educational resource for market participants to learn holistically about the differences between active and passive investments, and how each performs over various timeframes.   AL: How to take advantage of the wide range of index-based vehicles now available to market participants? ZB: S&P DJI launched a range of new indices for the South African market four years ago, including various smart beta indices that follow factor based investing style such as, quality, momentum, value, yield, low volatility and size. Our indices underly quite a few new ETFs listing on the JSE, ranging from indices that measure Local and Global Property, Global Equity, Multi Factor, Single Factors, Dividends, Fixed Income and Large Cap South Africa and US equity. Market participants have more choice with a broader range of index-based ETFs across asset classes and regions. Market participants that prefer unit trusts also have more options, as various asset managers now offer smart beta and index funds, as well as Robo Advisor solutions offered across the risk spectrum.     AL: Which indices may best suit particular risk/return goals, and when/how to employ each? ZB: As an index provider, our indices are meant to measure the returns of broad markets and market segments through a fully transparent and publicly available methodology that outlines the rules for governing the indices as well as the eligibility criteria to be added to an index. We do not govern our indices for outperformance.

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AGF’s catches up with Zack Bezuidenhoudt, Head of South Africa and Sub-Saharan Africa, S&P Dow Jones Indices, to discuss index-based products and passive investing.
 
Anna Lyudvig (AL): How South Africa is positioned for growth and what are the ways that passive investing may contribute?
Zack Bezuidenhoudt (ZB): The investment options South Africans have access to have increased dramatically over the last few years. More options in the passive space have meant that investors can now construct low cost strategies across multiple asset classes and styles of investing. S&P Dow Jones Indices (S&P DJI) has rolled out a range of plain vanilla and smart beta indices in South Africa that serve as the underlying for ETFs and index funds. S&P DJI introduced the SPIVA® South Africa Scorecard three years ago to show how active funds have performed against its respective S&P indices. The SPIVA® Scorecard is an educational resource for market participants to learn holistically about the differences between active and passive investments, and how each performs over various timeframes.
 
AL: How to take advantage of the wide range of index-based vehicles now available to market participants?
ZB: S&P DJI launched a range of new indices for the South African market four years ago, including various smart beta indices that follow factor based investing style such as, quality, momentum, value, yield, low volatility and size. Our indices underly quite a few new ETFs listing on the JSE, ranging from indices that measure Local and Global Property, Global Equity, Multi Factor, Single Factors, Dividends, Fixed Income and Large Cap South Africa and US equity. Market participants have more choice with a broader range of index-based ETFs across asset classes and regions. Market participants that prefer unit trusts also have more options, as various asset managers now offer smart beta and index funds, as well as Robo Advisor solutions offered across the risk spectrum.  
 
AL: Which indices may best suit particular risk/return goals, and when/how to employ each?
ZB: As an index provider, our indices are meant to measure the returns of broad markets and market segments through a fully transparent and publicly available methodology that outlines the rules for governing the indices as well as the eligibility criteria to be added to an index. We do not govern our indices for outperformance.

Our role as an index provider is to offer a full suite of indices that capture an array of market segments and/or investment strategies. Index offerings provide investors with choices - The S&P South Africa 50 Index measures largest 50 companies by float-adjusted market cap from the S&P South Africa Composite.while the S&P Global 1200 index measures a more diversified exposure to large global companies from Developed as well as Emerging Markets. The S&P Global Property index family and S&P Dividend Aristocrats index family measure companies that show characteristics of stable income streams.
 
S&P DJI invests heavily in research and education efforts aiming to meet market participants’ needs to understand where and how the factors work, and how it can help them achieve their long-term objectives.
 
AL: What are the innovative ways to combine active and passive investing in constructing portfolios across asset classes?
ZB: Various options are now available to pension funds and investors, both in the active and passive space. We have seen a trend in multi asset managers and Fund of Fund managers in South Africa who have started combining active and passive into investment strategies and portfolios. We are seeing more retirement funds also refining its investment strategies with low cost index based offerings when next reviewing its benchmarks, asset managers and objectives. The good news is, market participants in South Africa now have more tools to construct solutions based on their objectives, risk budgets and fee budgets.

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