The global exchange-traded fund (ETF) market continues to expand rapidly, reaching US$14.85 trillion in assets under management (AUM) in 2024. This reflects a 10-year compound annual growth rate (CAGR) of 17.1%.
South Africa is mirroring this global trend, dominating the local market with 72.5%* of all ETF flows in 2024. When combined with its indexed unit trust flows, Satrix accounted for 50.5% of all South Africa’s indexation flows. Fikile Mbhokota, Satrix CEO, notes that the leading investment house saw ETF inflows grow by a staggering 127% year-on-year from 2023 to 2024.
Mbhokota further highlights that Satrix’s 2024 inflows exceeded that of 2023 by close to R5 billion, taking the Satrix AUM to in excess of R240 billion as of 31 December 2024. She attributes Satrix’s robust ETF growth to investors’ appetite for transparent, cost-effective investment solutions. She anticipates that this trend will continue into 2025 and beyond as South Africa follows the global trend of indexation adoption.
If we look at total flows across the local industry, it paints an interesting picture. The proportion of total industry flows into active strategies vs indexed or rules-based alternatives (which include non-commodity ETFs and unit trusts) has changed dramatically.
Over five years, the actively managed share of net flows was 64.3%, with the three-year number dropping to 43.5% compared to indexed alternatives. The past 12 months saw index strategies account for 87.8% of net inflows – clearly showing that the market has realised the value of index strategies in their portfolios.
Key trends shaping the global ETF market:
Increased Adoption: ETFs are gaining traction globally due to their transparency, liquidity, and cost-effectiveness, spreading beyond the US to Europe, the Middle East and Africa (EMEA), and Asia-Pacific (APAC).
ETF Savings Plans: In Europe, ETF savings plans are growing rapidly, with the number of plans set to quadruple over the next five years, according to BlackRock.
Innovation: The global ETF industry set a record in 2024, with 1 787 new products launched in the first 11 months - a net increase of 1 234 after 553 closures. This surpasses the previous record of 1 619 launches over the same period in 2021. Cryptocurrency ETFs have dominated asset accumulation among new launches, led by iShares Bitcoin Trust (US$48.43 billion).
Active ETFs: Active ETFs have outpaced mutual funds, particularly in the US, with a significant US$3 trillion flow gap. This trend is gaining momentum in Europe.
Institutional Adoption: Institutional investors are shifting to ETFs for their cost-efficiency, transparency, and multiple use cases.
European-Specific Drivers: Regulatory frameworks are impacting ETF adoption in Europe, supported by increased transparency and digitalisation.
South African ETF industry stats
As of December 2024, the South African Exchange Traded Product (ETP) market capitalisation reached R225.4 billion, reflecting a significant 36.2% growth compared to the previous year. This expansion was driven by R29.6 billion in capital raised through the listing of additional ETP securities on the JSE during the year, alongside the increase in market valuations year-to-date.
Kingsley Williams, chief investment officer at Satrix, adds: “Satrix will continue to drive local adoption by ensuring our local and offshore offerings meet the needs of our investors. With an ETF market capitalisation of R64.8 billion at the end of December 2024, our product offerings, such as the MSCI World, S&P 500, and Nasdaq 100 ETFs, have seen strong demand, particularly as South African investors look to diversify their portfolios globally.
“Investors are also increasingly using our other global ETFs, such as Global Bond, MSCI India, and Global Infrastructure to better manage the diversification of their offshore exposure. In 2025, we’ll maintain our emphasis on offering cost-effective access while amplifying innovation as we explore new opportunities.”
Mbhokota says: “We believe South Africa will see continued growth in both equity and fixed-income ETFs, with an increasing share of investments flowing into internationally diversified funds. This growth is anticipated to be driven by both retail and institutional investors seeking cost-effective and transparent investment options that offer exposure to global markets. Investors are recognising the role ETFs can play in achieving a well-balanced, diversified investment portfolio, positioning ETFs as a core component of South Africa's evolving financial ecosystem.”
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