Overview of RMB Exchange Traded Funds (RMB ETFs)
What is an RMB ETF?
Rand Merchant Bank (RMB) is well established as the investment banking arm of FirstRand, one of South Africa's largest JSE-listed financial services groups. RMB has pioneered many financial instruments in the local and African markets and is reputed for combining innovation and entrepreneurship in support of its business philosophy and brand promise: Traditional values. Innovative ideas.
Consistent with RMB's reputation for insightful product innovation, the Bank has a platform of Exchange Traded Funds – RMB ETFs. RMB offers investors a range of ETFs that track various indices. The combination of securities on these indices gives the RMB ETF investor a broad investment base.
Each RMB portfolio aims to replicate or track (before expenses) the performance of an applicable Index (the Index) in terms of both the price performance and the income from the component securities of the Index. This allows investors the opportunity to obtain market exposure to the performance of the Index in an easily tradeable form through the shares being listed on the JSE.
The investment policy of each portfolio is to replicate the price movement and income yield of the index that it is designed to track. This is achieved by purchasing the constituent securities in the same weighting as they are included in the relevant index. The asset manager is not mandated, nor incentivised, to outperform the index.
Benefits of RMB ETFs
RMB ETFs represent a convenient and efficient method of investing in both domestic equity and bond markets. RMB ETFs offer key benefits to investors, including:
RMB ETFs are passive investments and the ideal product to reflect the daily returns offered by the market’s leading securities. Passively managed funds typically have lower transactional costs and fees than those associated with an actively managed fund.
Just like individual shares, RMB ETFs are priced constantly throughout the trading day and can be bought and sold at any time during JSE trading hours. RMB ETFs are listed on the JSE and offer investors guaranteed settlement and a regulated trading environment on the JSE through a stock broker.
An RMB ETF is highly transparent in nature — investors are able to see exactly which securities make up each ETF (see product information), including the weightings and sectors represented. Investors should view the constituents of the individual ETFs before selecting the ETF they believe is best suited to their own investment style and level of acceptable risk.
Efficient access to new markets and opportunities
An RMB ETF and the securities contained within it, broaden investment horizons and provide an effective method of accessing markets to which individual investors may not previously have had access to.
RMB ETFs give investors exposure to entire markets with one liquid trading instrument, conveniently and cost-effectively. This broader investment scope facilitates the potential to achieve investment returns that are consistent with the economic performance of specific asset classes.
Using a blend of these asset classes, investors are able to reduce the risk in their portfolios or take advantage of opportunities as they present themselves.
Trade like any share
RMB ETFs provide portfolio liquidity and flexibility. By incorporating RMB ETFs into a portfolio allows an investor to trade them just as they would any share; use a market order to buy, place a limit order to specify an exact buy price, limit exposure with a stop loss, or to short them if it is believed that the price will fall.
Advanced trading strategies
Given their index-based structure, RMB ETFs can be used as the core of a portfolio to provide a higher likelihood of returns consistent with the market performance of the index being tracked. Investors are then able to allocate their remaining investment capital to satellite investment opportunities in the pursuit of above market related returns.