Siyabulela Nomoyi, Quantitative Portfolio Manager at Satrix, explains that it all comes down to the rand-dollar exchange rate.

If you put the performance graph of the S&P 500 index next to the same graph for the Satrix S&P 500 Feeder ETF, you’ll notice that they rarely match. The two indices are made up of the same US companies, yet the lines tell different stories.

The reason isn’t tracking error; it’s the rand-dollar exchange rate.

The S&P 500 quoted in the news is a US dollar index, while the Satrix S&P 500 Feeder ETF is priced and benchmarked in rands.

A rand investor’s return has two moving parts: how US shares performed in dollars, and how the rand moved against the dollar over the same period.

When the rand weakens, each dollar the fund holds is worth more rand, which adds to the return. When the rand strengthens, the opposite happens.

A weaker rand can boost a good year or rescue a bad one, while a stronger rand can mute a good year or make a bad one worse.

2025 showed how big the effect can be. The S&P 500 gained about 18% in dollars (including dividends), but the rand also had a strong year, so rand investors in the Satrix fund earned only about 3%.

The fund tracked its rand benchmark almost exactly; the currency is what made the difference.

Reading the charts correctly

“Rand-denominated” doesn’t mean “rand-hedged”. A feeder fund carries the same currency exposure as investing offshore directly. The difference is structural: the feeder fund trades on the JSE and settles in rand.

Check what each chart is actually showing. Free charts often show the S&P 500 index in dollars, without dividends, while the Satrix fund is charted in rands and reinvests the dividends.

Tracking should also be judged in a single currency. Tracking difference and tracking error only mean something when fund and benchmark share a currency.

Measured in rand, the Satrix fund has remained within a fraction of a percentage point per year of its benchmark. This is the “compare like with like” principle in practice.

This applies to any rand-priced fund holding unhedged offshore assets (foreign investments held without financial contracts, or hedges, to protect against currency fluctuations), including other global ETFs that track world, emerging-market or European indices, rand-denominated global unit trusts, and the offshore portion of balanced funds. All have a currency performance line in the overall outcome.

The only thing that changes across global funds is the currency mix. A global fund measures the rand against a dollar-led basket, a European fund mostly against the euro.

And in global bond funds, the currency can matter more than the bonds themselves, especially on short-duration fixed-income products, as the currency volatility tends to be greater than the actual asset price movements.

The currency role in global funds

Offshore index funds carry two exposures: the tracked regional market and the rand exchange rate.

Historically, the rand’s long-run depreciation has been a tailwind: over the 20 years to the end of September 2026, the rand weakened from from R7.39 to R16.40 to the dollar, adding 3.8% per annum to a dollar-based offshore tracked product.

But over the past 10 years, the rand added only 1.8% per annum. And in any single year, the currency can swing the result by double digits or even turn a gain into a loss. This is illustrated in the table below:

Understanding the role of the exchange rate is important. Nobody can reliably forecast rand movements, so short-term swings say little about whether the investment is working.

If you’re considering investing offshore, keep these three principles in mind:

1. Compare like with like:Measure the fund against its rand benchmark, not against a dollar chart.
2. Remember the allocation’s job:Offshore exposure is there to reduce reliance on South Africa and reach companies the JSE doesn’t offer. Judge it over the long term, not month by month.
3. Set expectations early:  Rand returns can swing well above or below the dollar headlines because the currency itself is volatile. Preparing clients for this helps, as rand results can differ meaningfully in either direction.

Does this help with timing the market?

It can be tempting to try to time the market knowing that a stronger rand buys more dollars. But that means you need to get two calls right: the currency and the market.

The rand is often weakest when global markets are under stress, which is also when offshore shares tend to be cheap. By the time the rand recovers, markets often have too.

A more reliable approach is to phase in through regular contributions and rebalance to a target offshore allocation.

Over a long horizon, the entry exchange rate matters far less than the years of compounding that follow. It’s time in the market, not timing the rand, that drives outcomes.

This post was based on a press release issued on behalf of Satrix.