Johannesburg - The head of exchange traded funds at Absa Group's investment banking arm plans to secondary-list its star ETF NewGold in Botswana in early 2010 to test investor appetite as it expands in Africa.
Vladimir Nedeljkovic, head of ETFs and index products at Absa Capital, told Reuters in an interview on Thursday the unit also planned to launch new ETFs and products in its core South African market as more investors ditch equities and seek safe-haven assets in a global downturn.
"It seems on the investor side, people are starting to understand the advantages of ETFs. So I think (given) the state of the industry, now we're at the point where it's really going to start growing quite dramatically," Nedeljkovic said.
"We're looking at secondary-listing NewGold in Botswana... If that works, then we have a very good established base to have more products and much faster, and that will apply to all the other markets. We'll be as aggressive as we can."
ETFs, which are listed and traded on a securities exchange, track an index, sector or commodity and offer medium to long-term investment returns with relatively little risk.
NewGold is the largest ETF in South Africa and invests directly in gold, with around 52.5 tonnes of gold bullion in assets. Its value has soared as gold prices hit record highs.
Aggressive 2010
Nedeljkovic said Absa Capital also planned to launch commodity-based exchange traded notes by the beginning of 2010, which would be expanded to cover other asset classes including currencies and fixed income.
"It's either going to happen late this year or we're going to push it to the first weeks of January, just to catch everybody when they come back (from holiday)," he said, adding he expected to reach double digits in ETNs by the end of 2010.
ETNs are similar to ETFs but are issued on a balance sheet, which gives them more flexibility in hedging risk than ETFs.
Nedeljkovic said one of the biggest challenges remaining in the ETF market was to capture a wider distribution network by expanding investment interest to the retail market.
"As investment bank we have a very good and very developed institutional distribution and most of our products are predominantly in the institutional space, but I think the trick and the challenge is going to be to get it to the retail space in an efficient way."
Nedeljkovic said he expected the NewSA ETF, which invests in black economic empowerment (BEE) companies, to exceed a billion tonnes in assets in 2010. It currently has 500 million tonnes.
Absa Capital's Shariah ETF, which is more geared for the retail market, is being opened up to investors elsewhere on the African continent and Nedeljkovic said the firm was also in early talks with Middle Eastern investors.
"I think we're going to have a very aggressive early 2010, with lots of things coming into the market."
- Reuters