Cloud Atlas launches pan-Africa ETF on JSE

Apr 25th, 2017 | By | Category: Equities

Cloud Atlas Investing, a South Africa-based ETF issuer, has launched the Cloud Atlas Big50 Ex-SA ETF (Johannesburg: AMIB50), providing access to an emerging markets equity investment of 50 companies listed across 15 countries in Africa, excluding South Africa.

Cloud Atlas launches pan-Africa ETF on JSE

Members of Cloud Atlas Investing celebrate the launch of the Big50 Ex-SA ETF during the JSE’s market opening ceremony by blowing the traditional kudu horn.

The ETF tracks a proprietary, in house index covering companies from across Africa deemed to be representative of the continent’s economic growth. This includes listings in Egypt, Mauritius, Kenya, Morocco, Tanzania, Nigeria, Tunisia, Botswana, Namibia, Uganda, Ghana and Zimbabwe, as well as the BRVM Exchange in West Africa.

Maurice Madiba, chief investment officer, Cloud Atlas, 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 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,” added Donna Nemer, JSE director of capital markets.

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%.

Madiba notes that while the AMI Big50 ex-SA ETF offers individual investors an opportunity to invest in diverse African shares, it also provides an opportunity to institutional investors, who are able to invest up to five per cent of a fund’s capital in African investments according to Regulation 28 of the Pension Funds Act.

“We have received a dispensation from the South African Reserve Bank to offer this ETF to institutional investors according to Regulation 28,” said Madiba. “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.”

Such growth has been significant in recent years with the index, using back-tested data and accounting for expected fund fees over the period, returning 105.6% over the past five years or 15.5% per annum.

She continued: “Because the Big50 ex-SA ETF is suitable for individual investors as well as institutional investors, it offers a wider opportunity to participate in Africa’s growth. In addition, because it does not invest primarily in South African investments, it offers local investors Rand-hedging opportunities.”

The Cloud Atlas launch brings the total number of ETFs listed on the JSE to 53, with a total ETF market capitalisation of approximately ZAR73 billion.

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