Zshares Randhedge is a new, innovative and dynamic ETF developed specifically for the SA stock market investor. Much of the volatility that occurs in South African stocks relates to movements in the exchange rate. SA is in a unique position as a small open economy where changes in the exchange rate can have a significantly positive or negative effect on various sectors of the SA stock market.

Zshares offer investors the ability to invest in themes (for example, rand weakness or strength) in a way that is easy to understand and consistent. The indices that an ETF tracks can either be a generic index or a bespoke index. Zshares RandHedge is an “out of the ordinary” ETF because it focuses on a popular investment theme instead of a regular market weighted index. So instead of owning the market as a whole, investors are able to focus their portfolio on a particular theme by adding exposure to one or more Zshares. This exposure can be adjusted readily as views change due to their tradability.

Zshares RandHedge is an exchange traded fund designed to track the Investec RandHedge Index. This index was developed by Investec and is designed to create an optimised South African equity portfolio to outperform the FTSE/JSE Africa Top 40 Index (ALSI40) when the rand weakens, as measured by the rand/US dollar exchange rate. 

The Investec RandHedge index is a bespoke index developed by Investec and calculated by the JSE. The index constituents are selected according to a quantitative methodology and aims to optimise a strategic equity position on the JSE. The chosen constituents are combined in a portfolio that maximises the risk adjusted return. This is done within specific constraints. Given that the underlying weightings in the basket may vary during the quarter depending on market movements, the index constituents are reviewed and rebalanced every quarter. Zshares RandHedge therefore offers a statistically robust solution for enhanced index tracking in SA.

Zshares RandHedge can be seen as a Smart component of your equity portfolio, allowing you to focus on companies that will benefit from sustained rand weakness. There are many companies listed on the Johannesburg Stock Exchange (JSE) that benefit materially from sustained rand weakness. This is either because a significant portion of their regular earnings base is located in foreign markets or because they are able to materially improve their export earnings once the rand has weakened. This applies, in particular, to mining companies, but there are many other locally listed companies that are in a position to benefit from rand weakness.  It is important to recognise that sustained currency weakness is more likely to provide superior returns relative to that of the ALSI40.

The Investec RandHedge model is rigorously tested using multi factor regression technology to ensure the portfolio outperforms as long as depreciation is anticipated. Moreover, the Investec model shows that rand hedge stocks do not only comprise resource counters. In summary, Zshares RandHedge is able to offer a cost effective and tradable portfolio of stocks that benefit from rand weakness in a single security.

Key features:
• Focussed South African equity exposure
• Companies that benefit from rand weakness
• Smart alternative to the ALSI40 taking into account your rand view
• Cost-effective alternative to unit trusts
• Fully transparent and tradable
• Easy to invest via your stock broker
• Tax advantages
• Approved by the ACI, JSE and SARB
• Regulated by the FSB