Stanbic IBTC Holdings Plc is concluding arrangements for an initial public offering (IPO) to raise about N10 billion for an Exchange Traded Fund (ETF).
Stanbic IBTC plans to issue 100 million units of a new ETF to be known as IBTC NSE 30 ETF at a price of N100 per unit. The ETF will be built on the NSE 30 Index, a modified market capitalization index that tracks the 30 most capitalised companies on the Nigerian Stock Exchange (NSE).
The stocks that made up the NSE 30 Index are selected based on market capitalization from the most liquid sectors. Liquidity is based on the number of times the stock is traded during the preceding two quarters. To be included in the Index, the stock must be traded for at least 70 per cent of the number of times the market opened for business.
The IBTC NSE ETF came on the heels of campaign by Stanbic IBTC Holdings to increase awareness for collective investment schemes. The IBTC NSE 30 ETF will be the second ETF based on the NSE 30 Index and came amid efforts by several operators to broaden the derivatives market.
The NSE recently listed the Vetiva Griffin 30 Exchange Traded Fund tracks NSE 30 Index, the value-based index that mirrors the pricing trends of the 30 most capitalised stocks on the NSE.
The NSE had in late 2011 listed its first ETF, a gold-based ETF known as NewGold. NewGold originated from ABSA Capital and was then already listed on the JSE Stock Exchange of South Africa.
Ernst & Young, the third largest multinational professional services firm in the world, has reported that the global ETF industry had 5,042 ETFs, with 10,053 listings, assets of US$2.3 trillion, from 215 providers on 58 exchanges as at October 2013. It also predicted annual growth of 15 per cent to 30 per cent globally over the next five years.
Lotus Capital Limited and its professional parties also recently concluded pre-offer processes for the investment company’s ETF. Lotus Capital plans to launch the Lotus Halal Equity Exchange Traded Fund, an ETF based on the NSE Lotus Islamic Index, an adjusted market capitalization weighted index currently comprising 15 Shari’ah compliant equities listed on the floors of the Nigerian Stock Exchange (NSE).
The NSE Lotus Islamic Index is a collaboration between the NSE and Lotus Capital. The first index created to track the performance of Shari’ah compliant equities on the floor of the NSE, the NSE Lotus Islamic Index opens today with a year-to-date return of -4.36 per cent, worse than average equity return of -0.48 per cent.
Lotus Capital will be offering 100 million units of the Lotus Halal Equity Exchange Traded Fund at the price of 1/200th of the NSE Lotus Islamic Index on the day preceding the subscription, according to the regulatory filing. The NSE has already approved the Lotus ETF.
Lotus Capital recently indicated it was considering floating new mutual funds as it urged investors in its premier fund to have long-term outlook of between five to 10 years. In an investment update, Lotus Capital said the new funds would be tailored to meet the specific needs of different segments of investors.
ETF is a security that tracks the performance of a specified security or other assets including stocks, basket of assets, indices, commodity prices, foreign currency rates, and derivatives among others. ETF is distinguished by some defining factors including fixed capital or where the company has variable capital, then the amount of the paid up share capital of the company shall at all times be equal to the net asset value of the company and its shares shall have no par value.
An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be bought or sold at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be more or less than its net asset value.
The most important type of exchange-trade products, ETF may be attractive as investment because of its low cost, tax efficiency, and stock-like features. By owning an ETF, the holder get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Meanwhile, ETF does not sell individual shares directly to investors as only authorised dealers and investors are allowed to buy the usually large blocks of shares known as “creation units”.
There are many types of ETF. Index-based ETF, like index fund, tracks specified market index. Leveraged or inverse ETF seeks to achieve a daily return that is a multiple or an inverse multiple of the daily return of a securities index. An important characteristic of this type of ETF is that it seeks to achieve its stated objectives on a daily basis, and its performance over longer periods of time can differ significantly from the multiple or inverse multiple of the index performance over those longer periods of time. Active-ETF derives its name from its management strategy which entails day-by-day active trading and publication of portfolio holdings on a daily basis.
