Comparative performance of

Exchange traded funds have generated a great deal of interest in marketswhere they have been introduced including in the South African investmentmarket. In South Africa exchange traded funds are still relatively new and therange available is fairly narrow, however their popularity is growing at a fastrate.Since the introduction of exchange traded funds in South Africa, starting withthe listing of the Satrix40 in November 2000, exchange traded funds haveemerged as a viable investment alternative to unit trust funds. Given thatexchange traded funds are available at low cost, and that they are likely tooutperform active funds of similar risk, the question is: would an investor bebetter off investing in an exchange traded fund than in a unit trust portfolio.The purpose of this research was to compare the performance of an aggregatedomestic general equity unit trust fund, to that of the Satrix40, an exchangetraded fund, and to determine if an investor would have been better off investingwith the aggregate general equity unit trust manager or in the Satrix40.Results from the comparative study of performance indicate that, after costs,the cumulative average abnormal returns of the Satrix40 are significantly morethan those for an aggregate general equity unit trust portfolio. This suggeststhat an investor would have been better off investing with the Satrix40.