How Regulation Helped South Africa's Economy and ETF | ETF Trends

Regulation. Not something a hard-core capitalist wants to hear. But, South Africa’s stringent, yet pragmatic, market regulations may have allowed the economy and related exchange traded fund (ETF) to bounce back with grace.

South Africa was not overwhelmed by the financial crisis because of investments that adhered to the country’s high level of self-regulation as well as its limited exposure to experimental or risky asset-backed securities, according to etfexpress.

Ian Hamilton, chief executive of hedge fund administrator Investment Data Service Group, claims that other factors supported the country, as well:

  • The banking system did was not exposed to sub-prime mortgages and other poor investment products
  • Hedge funds did not have a lot of foreign investors that could have withdrew money in a crisis
  • Hedge funds were not highly leveraged

A majority of investors in South Africa rely on institutional investments, especially pension funds, and on long-term investment strategies that use portfolio diversification. The ability to deliver returns while keeping risk at a minimum has raised the South Africa hedge fund industry’s profile in the domestic and foreign markets.

A rising level of investor interest may cause some problems in the future, though: The industry will have to maintain a level of managers with the right amount of talent. Managers will also need to diversify their client base to obviate the potential exodus of cornerstone investors. The industry could also face a medium-term growth trend that will not be as bedazzling as previous years.

  • iShares MSCI South Africa Index (NYSEArca: EZA): up 51.8% year-to-date

ETF EZA

For more information on South Africa, visit our South Africa category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.