Index Tracking – CAVEAT INVESTMENTS – Caveat Capital MGMT (Pty) Ltd.

Index tracking: What you need to know

Index tracking has arguably been one of the most popular and most profitable forms of investment over time. Index tracking is a very attractive investment vehicle that allows you to

own a portion of a wide range of companies across the world. In short, Index tracking as an investment vehicle, for a passively managed portfolio, gets you value for your money as the cost structure of Index tracking can be very low.

What is the difference between a Unit Trust and an Exchange Traded Fund (ETF)?

Before we get to the difference between Unit Trusts and ETFs, we need to understand what Index tracking is. Think of it as a basket filled with shares of various companies across different sectors and geographical regions. These baskets can then be purchased and the purchase value will then be diversified across all of these companies that make up the basket.

Index tracking goes a step further by giving the investor a low cost means of investing in index tracking investment vehicles, such as Unit Trusts and ETFs, which tracks a specific investment goal. I.e., companies listed on the NYSE, companies who have a minimum ESG score, tech listed companies across the word etc.

Exchange Traded Funds (ETFs)

As the name suggests, exchange traded funds are listed securities which represent a portion of the fund. Simply put, these are listed securities which have been created by fund houses such as SATRIX or SYGNIA and the fund that they have created invests in underlying companies to make up the total fund. Portions of that fund are then sold to the consumer in the secondary market on an exchange such as the JSE. Because ETFs trade on an exchange there are buying and selling costs involved as with any listed security. However, the ongoing costs of ETFs makes them an attractive investment vehicle for an index tracking investment style.

Unit Trusts

Unit Trusts might be tracking the exact same index as some ETFs, as mentioned before they are merely different investment vehicles. Unit Trusts are created by fund managers; however, they don’t trade as listed securities on an exchange, you have to purchase them through the fund house itself. From one’s personal capacity there is not much difference between the two investment vehicles. Unit Trusts are just used as an alternative to ETFs from an institutional level as there are no exchange trading costs when buying and selling.

Who are we?

Caveat Capital Management is a strategic advisory firm based in Cape Town. Caveat Capital Management specializes in structuring tailor-made investment portfolios that serve your needs now and grow with you as your needs change. Caveat works to maximize your gains and minimize the risk.

What we offer

Caveat Capital Management has a competitive fee structure that incentivizes the portfolio manager to perform and the renumeration is highly linked to the performance of the portfolio. Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). Meaning that we have the required licensing to structure full-discretionary portfolios structured to your needs.

Disclaimer

This report does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Information and content

The information in and content of this publication are provided by Caveat Capital Management as general information about the company and its products and services. Caveat Capital Management does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Caveat Capital Management has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Caveat Capital Management shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided. Past performance is not an indication of future performance. Caveat Capital Management does not provide any guarantee regarding capital or performance.

Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA).