An exchange-traded fund (ETF) offering 50 African blue-chip companies outside SA made its debut on the JSE on Thursday.
Although the JSE already has two exchange-traded notes (ETNs) — Standard Bank’s Africa Equity index and Deutsche Bank’s MSCI Africa Capped 50 — offering portfolios of African shares, the AMI Big50 is the JSE’s first Africa-focused ETF.
The new product, which trades under the JSE’s code AMIB50, moved in a price range of between R12.32 and R12.22, with 5,300 units changing hands by 11:30am.
It brings the total number of ETFs now trading on the JSE to 53.
The AMI Big50 is managed by Cloud Atlas Investing.
“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,” the fund manager’s founder and CEO, Maurice Madiba, said.
“These could include stocks in multinationals that are listed on African exchanges, as well as local African companies.”
The new ETF is similar to Standard Bank’s Africa Equity index, whose JSE code is SBAEI, in that it excludes SA.
Deutsche Bank’s Africa Capped 50, whose code is DBAFRI, is 55% SA companies.
Standard Bank’s ETN includes companies listed in London or other exchanges outside of Africa provided 85% of their revenue comes from the continent.
A key difference between ETFs and ETNs is the former are permitted by the Treasury to be offered via tax-free savings accounts (TFSAs) provided they are not focused on a single commodity such as gold or platinum.
ETFs fall under SA’s collective investment scheme rules, obliging them to own the underlying portfolio of shares or other assets. The rules governing ETNs are more lax, allowing them to synthetically track indices through derivatives.
As the existing Africa-focused products offered by Standard Bank and Deutsche Bank are ETNs, they cannot be bought via TFSAs.
The government has encouraged pension fund managers to support African-listed companies by allowing 5% of their portfolios to be invested in the continent beyond the foreign investment caps set by regulation 28 rules.
“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,” Madiba said.