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Trade up with JSE's new index

By unknown | Oct 05, 2007 | COMMENTS [ 0 ]

Lihle Z Mtshali

Lihle Z Mtshali

A new JSE index is going to double as a comparison for whether unit trusts or exchange traded funds are a wiser investment.

The JSE, which outsources calculating its indices to Britain's FTSE, recently licensed the proprietary Research Affiliates Fundamental Index.

The new index is called FTSE/JSE RAFI 40.

Unlike the existing range of FTSE/JSE indices that rank shares according to market capitalisation, RAFI ignores share prices and uses a trademarked technique developed in the US three years ago by Robert Arnott, chairman of Research Affiliates.

Arnott's calculation is based on four parameters drawn from listed companies results statements - free cash flow, book equity value, total sales and gross dividends.

Both Old Mutual's Umbono RAFI Tracker Fund unit trust and a forthcoming Satrix exchange traded fund will select their basket of shares according to this new index.

Mike Brown, Satrix's managing director, said exchange traded funds carried lower costs than unit trusts and traded all day on the stock exchange, while unit trusts traded once a day and that price was fixed for 24 hours.

Old Mutual has set the minimum monthly investment for its Umbono RAFI Tracker Fund at R500, while Satrix's minimum for its range is R300 a month.

Old Mutual charges an annual fee of 0,75percent and there is also an upfront, once-off administration fee of 2,28percent, while Satrix charges a 0,1percent annual fee and no administration fee for any of its products.

So Satrix is cheaper, but Old Mutual's product has the advantage of already being on the market while the Satrix RAFI ETF will only be launched next year.

Contact Umbono Fund Managers on 0860-234-234 and Satrix on 086-1100-670.


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