JSE Showcase GLOBAL MARKETS February 2014 RMB Exchange Traded - - PowerPoint PPT Presentation

GLOBAL MARKETS

February 2014

JSE Showcase

RMB Exchange Traded Funds (ETFs)

Sharp, cost-efficient, passive index-tracking

RMB ETFs

Oct 2014 Yusuf.Wadee@rmb.co.za

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Why ETFs – What is an ETF?

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• ETFs are securities (Like a share)
• An ETF purchase is a purchase in a basket or collection of shares
• Because an ETF represent a baskets of shares they can also be thought of as a unit trust fund. They

are thus both a share and a unit trust fund!

• No STT (Securities Transfer tax) payable when buying ETFs. Buyers of ETFs thus save 0.25% on

purchase

• Simple and transparent
• ETFs and ETNs are not the same

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• 2. RMB Top40 ETF
• ETF Tracks index of SA’s 40 largest and most liquid shares
• 0.1% management fee (equates to a fund TER of 21bps)

Performance1 RMB Top40 ETF 3-month

• 2.96%

6-month 4.13% 12-month 14.90% 3-year (annualised) 22.02%

Note 1. Data for end Sep14

Financial ratios1 PE ratio 17.67 12-month historical distribution yield 2.5%pa

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RMB Top40 top 10 sectors Mining 20.85% Beverages 11.18% Personal Goods 8.39% Mobile Telecommunications 8.38% Media 8.18% Banks 7.76% Oil & Gas Producers 6.16% RMB Top40 top 10 holdings BHP Billiton plc 12.14% SABMiller plc 11.18% Compagnie Fin Richemon 8.39% Naspers Ltd -N- 8.18% MTN Group Ltd 7.6% Sasol Limited 6.16%

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Passive trends globally

Global ETP assets and number of ETPs by year

• Global AUM US$2.4

trillion = US$2.400 000 000 000!

Source: Blackrock report, Mar 2014

Number of funds Assets under management 4 4

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Passive trends globally

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• ETFs globally continue to dominate top holding of big investment portfolios:
• Tiger 21 Club
• Hedge Funds
• Pension funds
• Individuals
• Warren Buffets recently quoted in a letter to his shareholders:
• “My advice to the trustee couldn't be more simple: Put 10% of the cash in short-term government

bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers.” 5 “ETFs used by both individuals and institutions”

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Various types of ETFs available

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• Equity ETFs

− Large Companies ETFs − Medium Companies ETFs − Style ETFs − Sector ETFs

• Fixed Income ETFs:

− Inflation Linked bond ETFs − Government Bond ETFs

• Commodity ETFs:

− Gold, Platinum etc 6

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Using ETFs to trade the market

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• ETFs bought and sold depending on individuals view of the market or a particular sector. Long

term growth view of Equities – buy a large cap ETF,

• If interest rates going into a downward cycle – purchase Nominal Bond ETF
• ETFs can be analysed as per any other share – have a look at the P/Es, distribution/dividend pay-
• uts. Remember an ETF is simply a collection of a few shares and behave no different to any
• ther share.
• Common strategies :

− Core satellite − Parking cash 7

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Using ETFs to trade the market

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• Before trades are placed ensure that the there is a price on the other side – All ETF funds have

market makers

• ETFs trades are better executed at different times in the day.
• Preferable to trade ETFs during the day – rather then in the opening and closing JSE auctions
• ETFs not as expensive as shares for active portfolio traders- as they save on not paying 0.25%

STT each time an ETF is purchased 8

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Passive vs active strategies

Percentage of actively managed general equity unit trusts that outperformed the FTSE/JSE All Share Index1

Source: Fundsdata.co.za Note 1. Data based on Total Return after fees, fund performances versus the total return performance of FTSE/JSE All Share Index for period ending 31 Dec 2013

• ETFs also form an

excellent investment tool – and not used just for trading

• Combination of low cost

ETF management fees versus active asset managers over time has resulted in active asset managers not being able to beat the market over the long-term.

• Majority of SA active

managers do not

• utperform the market
• Becomes harder to
• utperform the longer the

term

1-year 2-years 3-years 5-years 7-years 10-years

43% 28% 26% 19% 29% 24%

0.0% 25.0% 35.0% 45.0% 5.0% 10.0% 15.0% 20.0% 30.0% 40.0%

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Passive vs active strategies

Percentage of actively managed general property unit trusts that outperformed the FTSE/JSE Listed Property Index1

Source: Fundsdata.co.za Note 1. Data based on Total Return after fees, fund performances versus the total return performance of FTSE/JSE Listed Property Index for period ending 30 Apr 2014

1-year 2-years 3-years 5-years 7-years

78% 26% 14% 5% 0% 24.1% 20.0%

0.0% 50.0% 70.0% 90.0% 10.0% 20.0% 30.0% 40.0% 60.0% 80.0%

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Using ETFs to invest in the market

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Rand cost averaging can be a great way to smooth out investment returns – especially when markets are volatile or falling!

10 20 30 40 50 60 70 80 Oct 07 Dec 07 Feb 08 Apr 08 Jun 08 Aug 08 Oct 08 Dec 08 Feb 09 Apr 09 Jun 09 Aug 09 Oct 09 Dec 09 Feb 10 Apr 10 Jun 10 Aug 10 Oct 10 Dec 10 Feb 11 Apr 11 Jun 11 Aug 11 Oct 11 Dec 11 Feb 12 Apr 12 Jun 12 Aug 12 Oct 12 Dec 12 Feb 13 Apr 13 Jun 13 Aug 13 Oct 13 Dec 13 Feb 14 Apr 14 Jun 14 Aug 14 All Share Index

• 60%
• 40%
• 20%

0% 20% 40% 60% 80% 100% 120% Oct 07 Dec 07 Feb 08 Apr 08 Jun 08 Aug 08 Oct 08 Dec 08 Feb 09 Apr 09 Jun 09 Aug 09 Oct 09 Dec 09 Feb 10 Apr 10 Jun 10 Aug 10 Oct 10 Dec 10 Feb 11 Apr 11 Jun 11 Aug 11 Oct 11 Dec 11 Feb 12 Apr 12 Jun 12 Aug 12 Oct 12 Dec 12 Feb 13 Apr 13 Jun 13 Aug 13 Oct 13 Dec 13 Feb 14 Apr 14 Jun 14 Aug 14

Investment Strategies: Lump sum versus debit order

Lump Sum Debit Order

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FNB Share Saver

• Share Saver gives you access to the Top 100 shares listed on the JSE by investing in the RMB Top40 and RMB MidCap

Exchange Traded Funds (ETFs)

• Most cost effective exposure to the equity market in South Africa
• Invest from R300 per month via FNB Online Banking www.fnb.co.za

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A return of 30.5% since inception

Source: RMB Global Markets

60 70 80 90 100 110 120 130 140 150 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14

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THANK YOU For more information visit www.rmb.co.za/investments www.ashburtoninvestments.com

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Strictly Private and Confidential

Strictly Private & Confidential This presentation has been prepared by FirstRand Bank Limited, acting through Rand Merchant Bank (“RMB”). The information contained in this presentation is confidential and intended solely for the use of the intended recipient. This presentation may contain information proprietary to RMB and accordingly may not be reproduced, acted upon or disseminated in whole or in part without RMB’s prior written consent. By attending this presentation, the intended recipient undertakes to keep the information contained in the presentation confidential and not to do any act or allow same to be done on his behalf which is in breach of the above mentioned prohibition. This presentation contains information which has not been independently verified by RMB. RMB and its directors, officers, employees and agents make no representation and give no warranty with respect to, and assume no responsibility for: the correctness, accuracy and completeness or otherwise of the information contained in this presentation; or the correctness or otherwise of the Advisers’ conclusions based on such information. Any liability of whatsoever nature and howsoever arising on the part of RMB, their directors, officers, employees and agents relating to the contents of this presentation is hereby expressly disclaimed. This presentation is intended for discussion purposes only and does not represent a commitment, proposal, recommendation, offer open for acceptance or agreement to enter into a

• transaction. Any transaction is subject to the agreement of final terms to be set out in a separate written agreement. The decision to enter into any transaction and to assume the risks

associated with the transaction rests solely with the intended recipient.

July 2012

Disclaimer

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