One of the biggest investment ‘megatrends’ currently at play globally, is the emergence of smart cities, due to rapid urbanisation around the world. Smart cities use technology to enhance the quality of life of residents, from air quality and transportation to health and safety alerts. Satrix, South Africa’s leading index investment business, is offering investors access to this rapidly growing investment opportunity through its new Satrix Smart City Infrastructure Feeder ETF.
Siyabulela Nomoyi, quantitative portfolio manager at Satrix, a division of SIM* says, “The growth in urban populations combined with the requirement for future cities to adapt to keep up with this trend makes a compelling investment case.”
The fund’s IPO goes live on 28 June, with listing planned for 26 July 2022. It is the latest under the Satrix megatrends strategy, which seeks exposure to powerful and transformative forces that are predicted to change the trajectory of the global economy. Blackrock, the world’s largest asset manager, has shortlisted technological breakthrough; demographics and social change; rapid urbanisation; and climate change and resource scarcity as among the long-term megatrends that will have “irreversible consequences for the world around us”.
Under the rapid urbanisation trend, the United Nations predicts there will be at least 43 megacities in the world by 2030, each with 10 million or more inhabitants, and each requiring new and innovative ways to develop, maintain and manage infrastructure. Research by McKinsey Global Institute also supports that technology will play a role in enabling smart cities that will deliver key enhancements to the quality of inhabitants’ lives.
In this context, the Satrix Smart City Infrastructure Feeder ETF tracks the performance of companies that help to turn cities into smart cities, as an alternative to the traditional infrastructure plays. The focus on nimbler companies offering infrastructure services over major infrastructure assets is illustrated by the sectoral exposures in the underlying index which include industrials (47.4%) information technology (36.8%), communication services (6.3%) and materials (3.4%).
“The Satrix megatrends strategy aims to make global investment megatrends accessible to South African investors through cost-effective, efficient index exposure to appropriate segments of the offshore market,” says Nomoyi. “The Smart City Feeder Infrastructure Feeder ETF is a thematic fund and the latest in a range of Satrix index trackers that invest across sectors and territories, into companies that will leverage the aforementioned megatrends, with a specific focus on those that offer innovative technology-backed solutions for smart cities.”
Smart city focused indices also offer the advantage of being aligned to the UN Sustainable Development Goals (SDGs) and feeds into a Sustainable Finance Disclosure Regulation (SFDR) Article 9 product, satisfying the appetite among local institutional and retail investors for impactful and sustainable investments.
“Our objective is to infuse the right global themes into an investment strategy that will offer diversification by having less correlated returns to the broader market. We expect this fund and fund strategy to appeal to all investors who want to invest sustainably and make a positive impact with their capital, while getting meaningful offshore exposure,” concludes Nomoyi.
The Satrix Smart City Infrastructure Feeder ETF will track the STOXX Global Smart City Infrastructure Index, which invests in a minimum 80 component holdings that contribute to SDG 6: Clean Water and Sanitation; SDG 7: Affordable and Clean Energy; SDG 9: Industry, Innovation and Infrastructure; SDG 11: Sustainable Cities and Communities; and SDG 12: Responsible Consumption and Production.
The Satrix Smart City Infrastructure Feeder ETF has an aggressive risk profile and will fall under the Global: Equity, General category of South Africa’s Collective Investment Schemes (CIS) funds. It offers SA investors offshore exposure to the US (47.9%); Japan (9.8%) and Sweden (6.1%) with smaller exposures to Australia, Canada, Germany, Finland, France, the UK and Taiwan.
|ABOUT SATRIX SMART CITY INFRASTRUCTURE FEEDER ETF|
|IPO opens||28 June 2022 at 09:00|
|IPO closes||14 July 2022 at midday*|
|Proposed JSE Listing date||26 July 2022|
|JSE Listing Code||STXCTY|
|INDEX TRACKED||STOXX Global Smart City Infrastructure Index|
|TARGETED ANNUAL TER||0.60%|
|ASISA CATEGORY||Global – Equity – General|
*IPO closes on SatrixNOW on 13 July 2022 at midnight.
*SIM stands for Sanlam Investment Management.
|ABOUT THE STOXX GLOBAL SMART CITY INFRASTRUCTURE INDEX|
|The STOXX Global Smart City Infrastructure Index offers exposure to companies that benefit from the urbanisation megatrend, focusing on providing services for development and efficient running of cities in a sustainable manner.|
|Top 10 Components |
1. China Tower Corp Ltd H, Communication Services, China
2. Cisco Systems Inc, Information Technology, United States
3. Mtr Corporation Corp Ltd, Industrials, Hong Kong
4. Kone, Industrials, Finland
5. Palantir Technologies Inc Class A, Information Technology, United States
6. Motorola Solutions Inc, Information Technology, United States
7. Booz Allen Hamilton Holding Corp C, Industrials, United States
8. Republic Services Inc, Industrials, United States
9. Casella Waste Systems Inc Class A, Industrials, United States
10. Juniper Networks Inc, Information Technology, United States
|The index scores highly based on ESG screening criteria|