An Intro To Tracker Funds

As the name suggests, index tracking funds replicate or track a particular index. A tracker fund which uses full replication simply holds the same shares that are contained in the index and in the same weighting as they appear in the index. 

A Simple Approach

The tracker fund mirrors the index with the aim of achieving a return as close as possible to that of the index.

For example, a fund that fully tracks the FTSE/JSE Top 40 Index would hold the shares of the same forty companies, in the same proportion (weighting), as the index. If the index or sector does well so does your tracker fund. If the index drops so will the price of the fund. The fund therefore tracks or replicates the performance of the index. This is the same whether the fund is an ETF or a unit trust.

Using the Satrix Top 40 as an example, the portfolio manager of the fund will buy and sell shares when the FTSE/JSE Top 40 Index adds or removes stocks from the index. This is known as rebalancing and, in the case of the FTSE/JSE Top 40 Index, this is done quarterly, in line with the quarterly index review. Any other index changes that occur  during the quarter will be applied to the fund simultaneously.

Since there is no active management, which is share picking by exercising investment judgement, tracker funds are traditionally referred to as a ‘passive’ form of investment management. 

A Wide Range, at Your Disposal 

Satrix offers a wide range of index tracking funds in both ETF and unit trust vehicles, which means you can select funds across asset classes (for example equity, bonds, property, offshore). 

The Satrix Access Range is a concentration of five flagship Satrix funds that work well for beginner investors. These five investment vehicles span risk categories and themes to offer a bit of everything across the Satrix spectrum.

You can also select niche funds that track a particular sector or theme, for example financials, resources, industrials, high dividend yield, or momentum. In the Satrix unit trust suite there are also multi-asset or balanced funds that offer you a blend of all asset classes in one single fund.

An added benefit of a tracker fund is that it does not have to incur the higher costs associated with research to perform active management and therefore can provide market returns at a lower cost.

Disclaimer

_{Satrix Investments (Pty) Ltd is an approved FSP in terms of the Financial Advisory and Intermediary Services Act (FAIS). The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. Consult your Financial Adviser before making an investment decision.}

_{Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities and an authorised financial services provider in terms of the FAIS.} 

_{While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSPs, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaim all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.}