The SATRIX slogan “Own the market” came to mind as I was writing this post. It is easy to say that you own a share of the market when the times are good. Let a Steinhoff debacle rock the market and you can no longer say that with confidence.

I was confidently going into the weekend last week relieved that I wasn’t exposed to Steinhoff or any of its related companies financially. Just before my run on Saturday morning, I recalled that I owned SATRIX products, the SATRIX INDI ETF.

An ETF literally means exchange traded fund. It is similar to a unit trust fund in that the administrator (SATRIX in this instance) puts your relatively small amounts of money together with cash invested by other people to buy a basket of shares. The SATRIX INDI ETF tracks the performance of companies whose shares are listed in the FTSE/JSE Industrial 25 Index. It includes the largest industrial companies listed on the Johannesburg Stock Exchange (JSE). These are shares in companies that operate in the consumer goods and services, telecommunications and health care and include the likes of Woolworths, Clicks and Vodacom.

The investor owns a proportionate share of the investments held by the SATRIX INDI fund. This makes the investor an indirect shareholder in the 25 companies that make up the JSE Industrial Index.

As I was thinking about my SATRIX INDI ETFs I realized that I actually didn’t know which shares made up that index fund. I immediately logged onto the SATRIX website and realized that the SATRIX INDI ETF in fact held positions in both Steinhoff and Shoprite. My heart sank. That was until I realized that Naspers was also part of that same basket of shares and it had a larger share of the basket than Naspers and Shoprite combined.

In actual fact Naspers had the largest share of the basket at 35.02%. Steinhoff and Shoprite had a 5.23% and 2.76% share of the basket respectively. Relief set it because I was aware of how well Naspers had done this year, up 87.20% from last year. I knew then that Naspers together with Richemont (the two largest holdings of this fund) would “carry” the fund for 2017. The effect of the fall in the Steinhoff and Shoprite share prices would be reduced as a result.

I later checked the price of SATRIX INDI in the last week and it had barely moved but for a 2.4% decline on the 6th of December. On Friday the 8th of December it closed at R80.12 per share whereas the previous Friday on the 1st of December it closed at R82.71. It could have been worse. Shoprite fell by 7% while Steinhoff fell 89.65% in that same period. Meanwhile because I was invested in a basket of shares with limited exposure to Steinhoff, my loss was only 2.4%.

Not all the shares in this the SATRIXINDI have shot the lights this year. Here is a snapshot of the performance of some of the companies included in the SATRIXINDI basket of shares for the 12 month period to the 11th of December 2017:

Company Share of the basket Share Price (R) Price Movement %
12/12/2016 11/12/2017
Life healthcare Group Holdings 0.92% 32.10 26.23 -5.87 -18.29%
Mediclinic International 1.31% 126.68 107.85 -18.83 -14.86%
Woolworths Holdinings 1.60% 84.01 57.78 -26.23 -31.22%
Shoprite Holdings 2.62% 190.00 216.30 26.30 13.84%
Aspen Phamacare Holdings 2.99% 268.81 285.87 17.06 6.35%
MTN Group 6.14% 122.79 127.00 4.21 3.43%
Compagnie Financiere Richemont 17.15% 89.75 119.53 29.78 33.18%
Naspers 35.02% 1,960.37 3,670.00 1,709.63 87.21%
Figures correct as at 11/12/17

The full list of the shares in the SATRIX INDI basket is available here

As I was not invested directly in each of the above companies, I bore the losses and the gains differently from someone who was. I still got exposure to the stock market, with limited risk than a person who bought shares in these companies directly. And my returns still beat that of a person who  put their money in a bank account and some who  invested directly in the stock market. The SATRIX INDI was up 27.13% for the 12 month period to December 11, 2017.

This awareness prompted me to think about the reasons I invested in index funds alongside direct investment in the stock market. It was simply to diversify my investment portfolio, by not putting all my eggs in one basket while minimizing my risk of loss. Had I put all my money in Steinhoff shares since December last year I would have lost 89.65% of that investment however, by investing in a diversified ETF I only lost 2.4%. In the end it was about investment returns. Investing in a basket of shares reduced the variability of the returns of my overall investment portfolio.

Do you invest in index funds/ETFs? Are you aware of the impact the fall in the Steinhoff share price has had on your investments or pension fund?