Standard Bank. Picture: MARTIN RHODES
Standard Bank. Picture: MARTIN RHODES

In a move that demonstrates just how seriously the country’s largest financial institutions are taking the trend towards the use of passive investment products, Standard Bank and Stanlib have merged their respective index-tracking businesses into a single new entity, called 1nvest.

“Stanlib and Standard Bank both wanted to grow their existing ETF (exchange traded funds) businesses based on the future potential of passive products, so it made sense to have one group provider,” says Johann Erasmus, an executive for 1nvest.

Passive products can take the form of both exchange ETFs which can be bought on a stock market, or unit trust funds usually accessed through a linked investment service provider.

The new entity, which received regulatory approval in September, is 50% owned by Liberty and 50% by the Standard Bank Group (SBG). SBG owns a 54% stake in Liberty, who in turn owns asset manager Stanlib.  

1nvest has been endowed with a portfolio of 28 products comprising assets under management of R12bn after its owners moved all non-balance sheet passive products into the entity.

Exchange traded notes, which are effectively debt instruments created on the strength of an institution’s balance sheet, will not be vended into 1nvest.

1nvest’s range comprises local and global equity and fixed income exchange traded funds (ETFs) and unit trusts, commodity ETFs, balanced (multi-asset class) and smart beta unit trusts.

Erasmus says with access to the distribution channels of Liberty, Stanlib and Standard Bank, 1nvest can capture a lot of the flows into passive products.

“By putting them in a single place it provides everyone with the opportunity to use them seamlessly. Our offering can be used as stand-alone products or as part of a broader solution,” says Erasmus.

The decision to create one platform for the passive offering came from the recognition of the huge swing that has taken place from active to passively managed investment products across much of the developed world.

As opposed to employing a fund manager to oversee the investments in a portfolio, passive products aim to mirror the performance of an index such as for example, the FTSE/JSE Top 40 index, thereby delivering returns as close to those of the market as possible.

Passive products have become popular globally due to their low cost and the inability of active managers to consistently outperform the market.

According to information supplied by Blackrock, total global investment flows into passive products in 2018 amounted to $514bn, with the industry’s total assets under management at the end of the year standing at $4.79-trillion.

Erasmus says that while the use of passive products is still small in SA, the shift is undoubtedly under way.

“ETFs on the JSE now account for about R80bn of assets under management, but what is not that visible is assets under management in index-tracking unit trusts. Based on our estimates, there is about R200bn-R300bn or more invested there,” says Erasmus.

thompsonw@businesslive.co.za