Stanlib’s addition to the property ETF market forms part of the company’s long-term strategy to cover all asset classes in low-cost index products.

"Property is an entirely different asset class, and should be managed as such. This is why a specialist ETF makes sense in this … market," Stanlib’s head of ETFs, Len Jordaan, said on Tuesday.

Stanlib’s property ETF will become the second index to track the FTSE/JSE Sapy index, which is also tracked by competing fund the PropTrax Sapy index.

Earlier this year, Resilient Property Income Fund sold the management company of its PropTrax ETF business to Grindrod Bank for R4m.

Grindrod Bank MD David Polkinghorne said on Tuesday that with the ETF market set to grow in South Africa, the bank wanted to provide "an extended suite of products, each with their own unique value proposition".

Mr Jordaan said that "while in the past it was lumped with other listed equities", property behaved "very differently from company shares".

He said property had become a distinct and popular asset class with capital and income-generating attributes. South African listed property extended its strong run last year, with total returns above 30%, helped by the low interest rats and the positive performance of retail and industrial properties.

However, returns this year are expected to remain healthy but at more subdued levels, and Mr Jordaan said an ETF provided the ideal means of exposure — rather than directly investing in listed property stocks.

"While investors want to retain their property exposure, they are now more cost-sensitive, especially considering the more muted outlook for 2013. The property ETF will provide property exposure at lower costs," he said.

The Stanlib property ETF had already accumulated R50m in assets, which gave the fund economies of scale from which to build, Mr Jordaan said.

The fee structure of the ETF comprised an asset management fee of 0.15%, plus costs, "making it a very competitive offering", Stanlib said.

Mr Jordaan said part of the total fee was made up of trading costs and taxes in the fund, which are incurred whenever the fund rebalances to the index. "Based on our experience with equity funds, this should be in the region of 10 to 15 basis points, but is variable due to capital events such as rights issues that require additional rebalancing.

"We are targeting a total expense ratio of 0.40%, but we are only able to publish what we have achieved after nine months of operation," Mr Jordaan said.

The PropTrax Sapy index charges an annual management fee of 0.45%-0.8%, depending on the size of the investment.

Source: BD