ETFs versus Unit Trusts – A South African Perspective

What is an ETF?

ETF stands for exchange traded fund, a listed investment product that tracts the performance of a stock exchange index, trading like a share or stock on a stock exchange.

What are unit trusts?

Unit trusts are collective investment schemes that are divided into equal parts or units, investing in different portfolios of assets in order to track a market index.

Put differently, unit trusts are the pooled money of numerous investors who have entrusted their investments to a fund management company (Manco) to trade on their behalf on the Johannesburg Stock Exchange.

What are indices?

Indices, also called indexes, are baskets of asset classes such as bonds, shares, or commodities, typically focusing on a specific sector of a stock exchange, such as gold mining, industrials, or financials.

Differences between ETFs and Unit Trusts

Similarities between ETFs and Unit Trusts

Both ETFs and unit trusts are investment tools that track indices on stock exchanges, offering diversified exposure to the markets.

They both contain packages of shares that provide the return of a specific market to investors by tracking the particular market index.

Advantages of ETFs

• Prices of ETFs change during a trading day, enabling investors to take advantage of price swings.
• ETFs allow an investor to invest in a variety of asset classes through a single listed investment vehicle, saving investors extensive research time and money.
• ETFs are exempt from securities transfer tax (STT).

Advantages of Unit Trusts

• Strict legal regulations ensure that an investor’s money is safe.
• Lower risk than other types of investments. A unit trust spreads an investor’s money across various asset classes.
• Performances are easy to track.
• No huge amounts needed to invest in quality assets. An investor can start with monthly debit orders of R500 or a lump sum payment of R50 000.
• Unit trusts are easy to buy or sell.
• Trading costs are normally cheaper than the costs involved in ETFs.

Disadvantages of ETFs

• Not all ETFs are actively traded. Low liquidity and low trading volumes can trigger the entry of a market maker, causing the bid-offer spread to be too wide to be cost-effective.
• Normally more expensive than unit trusts for individual investors.

Disadvantages of Unit Trusts

• There are about 1 500 registered unit trusts in South Africa, posing a major challenge to investors to pick the ones that suit their investment strategies and needs.
• Investors can be tempted to redeem their unit trusts in the short term, contrary to the general assumption that unit trusts are medium to long-term investments.

Ways to Invest in ETFs and Unit Trusts

ETFs

• Make use of an authorised JSE stockbroker.
• Open an investment plan with an ETF provider.
• Use a Linked Investment Service Provider (LISP) Platform or an ETF Platform.

Unit Trusts

• An authorised Financial Advisor can advise you.
• You can directly approach a fund management company (Manco) that offers index-tracking unit trusts.
• You can use a LISP which offers access to index-tracking unit funds.

Some examples of ETFs trading on the Johannesburg Stock Exchange (JSE)

Information according to the List of Exchange Traded Funds ETFs, published on the JSE website (www.jse.co.za). Information correct as of 17 August 2018.

The Satrix 40 ETF tracks the FTSE/JSE Top 40 Index. It is the oldest ETF of the more than 70 ETFs listed on the Johannesburg Stock Exchange (JSE). In March 2025, the Sunday Times’s Business Times reported that South African investors chose the Satrix 40 ETF as their favourite ETF. It celebrated its twentieth year of trading in 2025.

Other ETFs tracking the FTSE/JSE Top 40 are the Stanlib Top 40 ETF and the Sygnia Itrix Top 40 ETF.

In addition to ETFs that track the JSE Top 40 Index, the following ETFs are examples of ETFs that track other local equity:

• The Satrix INDI ETF tracks the FTSE/JSE Industrial 25 Index. An index that was the leading local equity ETF over the ten years ending December 2019.
• The J521 Index, which represents the preference shares on the JSE, is followed by the CoreShares PrefTrax ETF.
• The Satrix RESI ETF tracks the FTSE/JSE Resi Index that is a basket of resources shares.

Regarding international equity, the following ETFs are examples of funds that follow indexes on foreign stock exchanges:

• The following three track the S&P 500 Index: CoreShares S&P 500 ETF, Satrix S&P 500 ETF, and Sygnia Itrix S&P 500.

(The S&P 500 refers to the Standard & Poor’s stock market index that tracks the stocks (shares) of 500 United States companies with large market capitalisations.)

• The Sygnia FTSE 100 ETF tracks the FTSE 100 Index, a market capitalisation weighted index that comprises the 100 largest companies in the United Kingdom.
• The Sastrix Nasdaq 100 ETF tracks the Nasdaq100® Index consisting of the 100 largest non-financial companies (United States and international) listed on the Nasdaq Stock Market, situated in New York City.

Interesting to know, the Invesco QQQ ETF is the best-known ETF, and quite popular at that, tracking the Nasdaq®100 Index.  

There are also ETFs following local and international bonds, such as the Ashburton Inflation ETF that tracks the local Government Inflation-Linked Bonds Index (GILbx) and the Ashburton World Government Bond ETF, tracking the Citi World Government Bond Index.

Some ETFs on the JSE track commodities such as palladium bullion, platinum bullion, physical rhodium, and gold bullion, which is tracked, inter alia, by AfricaGold ETF, describing that each unit of gold bullion equals approximately 1/100th of a fine troy ounce of gold bullion in South African rand (ZAR) terms.

An interesting entry under the commodities section on the JSE list of ETFs is what is called the Krugerrand Custodial Certificate (KCCGLD), tracking 1oz Krugerrand coins. The KCCGLD is a modified type of ETF. It is listed and traded as an ETF, but unlike traditional ETFs, it only invests in a single commodity – gold.

Some examples and performances of South African Unit Trusts

Business Insider SA published an article on August 25, 2025, in which the top and worst performing South African unit trusts over the past year were listed. The lists were compiled by Morningstar Inc., an investment research firm based in Chicago, USA.

The top unit trusts mainly invested in global equity, specifically technology companies such as Amazon and Facebook, to name but a few.

The top three unit trusts were:

• IP Global Momentum Equity

This is a moderate to high risk investment, with a return of 86.63% over the past year. As of September 30, 2025, it held asset classes like foreign equities (93.90%) and foreign property (3.54%). The foreign equities included Shopify (5.13%), Facebook (3.85%), and Amazon (3.37%).

• Naviga BCI Worldwide Flexible

The fund, launched on 1 September 2017, included offshore equity of 93.98% at the end of August 2025. The return was 85.69% over the past year. Some of its top investment holdings included: Shopify (14.9%), Apple (7.4%), and Amazon (5.2%).

• Old Mutual Gold

The Old Mutual Gold fund was founded on February 5, 2025, aiming to offer ‘superior returns over the medium to longer term.’ It mainly invests in the shares of companies involved in gold and other precious metals.

Its top three holdings as of September 30, 2025, was: AngloGold (29.20%), Goldfields (28.39%), and Harmony (8.28%). The return on this fund was 81.68% for the past year.

It is significant that the top 3 unit trusts mainly invested in technology companies or gold mining companies. Companies that are part of industry sectors that have gained from lockdowns and uncertainties caused by the Covid-19 pandemic.

The average return for the top 12 performing unit trusts the past year was 64.27%!

The worst three unit trusts were:

• Select BCI Property A

The Select Boutique Collective Investments (BCI) Property A fund is managed by Boutique Collective Investments. It primarily invests in domestic property which reflected 98.93% of its portfolio on 31 August 2025.

The top ten holdings comprise, inter alia, Investec Australia Property Fund (11.5%), Growth Point Properties Ltd. (10.3%), and Redefine Properties (8.2%).

It generated a negative return of -48.67% for the past year.

• Ci Property B

Also managed by Boutique Collective Investments, the investment objective of the fund is ‘to provide investors with capital growth and income from property investments through exposure to the South African and Global listed real estate market, through passive investment strategies.’ (Accentuations by the article writer.)

As of June 30, 2025, its two highest asset allocations were SA Property (index swaps) (71.23%) and SA Property (27.84%) with the following 3 top equity exposures: Growthpoint Properties, Redefine Properties, and Fortress Reit Limited.

The fund delivered a negative return of -47.52% over the past year.

• Coronation Property Equity A

The Coronation Property Equity Fund is a high-risk investment, investing in South African listed property companies, such as Nepi Rockcastle Plc (19.1%) and Growthpoint Properties Ltd. (13.2%). Figures of percentage of the fund as of 30 September 2025.

The fund’s return for the past year was -44.67%.

Noteworthy, all three unit trusts above primarily invested in property companies, which was also the case with all the unit trusts that were among those that were the most affected by the coronavirus pandemic in 2025. It is also a matter of fact that property companies were already under financial stress before the Covid-19 pandemic.

The average negative return of the 13 worst unit trusts over the past year was -43.62%!

To get a more realistic picture with regard to the performances of unit trusts and to mitigate the effects of the coronavirus pandemic of 2025, it is more satisfactory to look at performances over three to five years, which are indicated in the tables below:

• Top three performing unit trusts over the past three and five years

Performances are annualised and the number in brackets after the percentage figure indicates the fund’s position on the list of best performers for the past year.

• Three worst performing unit trusts over the past three and five years

Performances are annualised and the number in brackets after the percentage figure indicates the fund’s position on the list for worst performances over the past year.

* Not among the 13 worst performers of the past year.

Note: This article does not intend to provide investment or trading advice. Its aim is solely informative.