Satrix MSCI World and Core Shares Total World Stock

Which ETF is best for you?

Broad market equity ETFs (exchanged traded funds) are a great tool for gaining exposure to a diversified basket of global equities at a low fee through a single instrument. Additionally, the ability to hold such an instrument in a tax-free savings account makes it even more of an attractive investment vehicle for retail investors looking to create long term wealth.

In this post in unpack two of my favourite broad market / global equity ETFs, the Satrix MSCI World and the Core Shares Total World Stock.

The Satrix MSCI World Index trades under the JSE ticker of STXWDM and tracks the performance of the MSCI World (Developed Markets) Index in South African Rand by investing in the iShares Core MSCI World UCITS ETF (underlying fund) securities. The MSCI World (Developed Markets) Index is a broad global equity index that includes large and mid-cap companies across 23 developed market countries. It covers approximately 85% of the free float-adjusted market capitalization in each country. The ETF has a total market capitalisation of R9.73 billion and is a total return ETF meaning that dividends are automatically reinvested into the ETF and reflected in the underlying index price. The ETF has a total number of 1 515 individual holdings and has a PE of 18.92 and a price to book of 2.95.

The ETF was launched on 25 July 2017 and has a total expense ratio of 0.35%. Since inception the fund has generated an annualised return of 15.91%, whilst the benchmark it is designed to track generated a return of 15.93%. Looking to the sector allocations of the underlying portfolio the holdings can be broken down as follows:

• Information Technology: 22.22%
• Real Estate: 2.33%
• Utilities: 2.78%
• Industrials: 11.05%
• Materials: 4.15%
• Health Care: 12.78%
• Consumer Staples: 7.39%
• Consumer Discretionary: 11.11%
• Financials: 14.64%
• Energy: 4.56%
• Communication: 6.99%

Next lets take a look at the Core Shares Total World Stock ETF. The Core Shares Total World Stock Feeder ETF tracks the FTSE Global All Cap Index, which covers both well-established (developed) and still-developing (emerging) markets. To achieve its investment objective, the Funds will, apart from assets in liquid form, consist solely of participatory interests in the Vanguard Total World Stock ETF accordingly the Fund is a Feeder Fund.

The ETF has a total market capitalisation of R1 billion and has a historic dividend yield of 1.41%. Income under this ETF is distributed to investors and thus the movement in the index price does not reflect reinvested dividends as these are paid out to investors. This is important to note as the returns between this ETF cannot be compared directly to the Satrix MSCI World Index because of this. The ETF was launched on 17 May 2021 and since inception has generated a return of 13.5% annualised compared to its benchmark which generated a return of 14.5%. The Core Shares ETF has thus had a larger tracker error than the Satrix ETF when compared to its underlying benchmark. The Core Shares Total World Stock ETF has a total expense ratio (TER) of 0.29% which is 0.06% lower than that of the Satrix ETF. 

The Core Shares ETF has exposure to over 9 000 companies which is significantly more than that of the Satrix ETF. The Core Shares Total World Stock ETF has a price to earnings ratio of 17.2 and a price to book of 2.5, both of which are lower than that of the Satrix MSCI World. Another key difference between the two ETFs is there country weightings. Core Shares has around 63% exposure to US equities whilst the Satrix ETF has around 69% of exposure to US equities.

Whilst I hold both ETFs in my TFSA I have a slight preference to the Core Share Total World Stock given the lower TER, greater diversification in terms of number of holdings, less exposure to US equities which are more expensive on a valuation basis.