A new exchange-traded fund (ETF) offers investors access to an index covering 50 companies across Africa outside South Africa. The AMI Big50 Ex-SA ETF tracks a new index designed by Cloud Atlas Investing, a Johannesburg-based collective investment scheme. It covers shares in 15 African exchanges including Egypt, Mauritius, Kenya, Morocco, Tanzania, Nigeria, Tunisia, Botswana, Namibia, Uganda, Ghana and Zimbabwe, as well as the BRVM Exchange in West Africa.
The ETF was listed on the Johannesburg Stock Exchange on 20 April. Donna Nemer, Director of Capital Markets at the JS, said in a press release: “The JSE is committed to playing a role in the expansion and deepening of Africa’s investment opportunities. This new ETF offers an easy, safe way to invest in African markets and supports the continent’s growth journey.”
ETFs are investments that track the performance of a group or “basket” of shares, bonds or commodities. They can offer tax and cost benefits to some investments, and are good for investors who do not want to pick and choose individual shares, but they are also used by institutional investors. They are regulated by the JSE and the Financial Services Board (FSB) and can be acquired, like any other listed share, through a stockbroker or online trading account, or via an investment platform that offers a monthly debit-order facility.
Maurice Madiba, CEO and Founding Director of Cloud Atlas Investing, said: “We want to improve liquidity and help to develop African markets for investors to feel the full robustness of these markets, and as such, have chosen to invest in stocks that are listed on African exchanges. These could include stocks in multinationals that are listed on African exchanges, as well as local African companies.”
The fund is available for individual and institutional investors. Regulation 28 of the South African Pension Funds Act allows pension funds to invest up to 5% per cent of a fund’s capital in African investments outside South Africa. Madiba explained: “We have received a dispensation from the South African Reserve Bank to offer this ETF to institutional investors according to Regulation 28. We have already opened up the ETF to the retail market, and certainly have plans to bring the institutional investor on board. We believe this ETF is a good product to have for the long-term investor because of its growth prospects, and as such will be of interest to both the individual and the institutional investor. It is important to us that we try to facilitate ways in which Africans can participate in Africa’s growth.”
Nemer adds it offers South African investors a wider opportunity to share in Africa’s growth and “Rand-hedging opportunities.”
According to this report on website ETF Strategy, the fund has certain concentrated exposures including significant country exposure to Morocco (28.4%) and Egypt (19.3%), as well as highly concentrated single holdings in Moroccan telecoms firm Itissalat Al Maghrib (20.6%) and Egyptian bank CIB (11.0%). Other top exposures include Nigeria (13.7%), Kenya (11.0%) and stocks listed on the BRVM Exchange in West Africa (6.3%). The top sector exposures are to banks (29.3%), telecoms (27.9%), food & beverage (17.7%) and industrials (14.6%). (Data as of March 2017). The fund has total fees of 1.17%.
The ETF market has seen steady growth globally as well as in South Africa. There are 53 ETFs listed on the JSE, with a total ETF market capitalization of almost R73 billion ($5.4bn). Several providers offer various indexes on African markets including regional indexes.