In Zimbabwe, investing in Exchange Traded Funds (ETFs) is witnessing traction, and various ETFs of different types are emerging. It is easy to invest in an ETF but before investing, ensure that you choose the one that suits your financial plan the most.
Investing in ETFs or exchange-traded funds is equivalent to investing in all constituents that are part of an index directly.
According to Forbes, the yields or returns generated by ETFs replicate the benchmark index. It gives investors an opportunity to benefit from diversity, flexibility and scope for growth that comes from ETFs being traded on stock exchanges.
- An exchange-traded fund (ETF) is a marketable security that tracks an index, sector, commodity, or another asset which can be purchased or sold on a stock exchange the same way a regular stock can.
- Zimbabwe became the fifth country in Africa to list an ETF, with South Africa, Nigeria, Kenya, and Egypt also currently trading the instrument.
Here is the list of Exchange Traded Funds (ETFs) on the Zimbabwe Stock Exchange (ZSE):
Old Mutual Zimbabwe ZSE Top 10 ETF
Pan-African financial services group Old Mutual introduced the Old Mutual Zimbabwe ZSE Top 10 ETF.
The fund tracks the ZSE Top 10 Index, which consists of the largest ten companies, as ranked by investable market capitalization, listed on ZSE. CABS Custodial Services is the fund’s custodian, while Stanbic Bank is the trustee.
The constituents reflect the ZSE Top Ten Index, independently calculated and managed by the Zimbabwe Stock Exchange. Rebalancing of the ETF is done every quarter.
With so few constituents, the fund is naturally highly concentrated, with the two largest companies, beverages manufacturer Delta Corporation and Telecommunication giant Econet Wireless Zimbabwe – accounting for weights of 25.03 per cent and 23.47 per cent, respectively. The next largest stocks in the fund are Innscor Africa (12.84 per cent), EcoCash Holdings (9.97 per cent) and financial services conglomerate CBZ Holdings (4.97 per cent).
Morgan & Co Multi-Sector ETF
The Morgan & Co Multi-Sector ETF is Zimbabwe’s first actively managed exchange-traded fund. According to the Morgan & Co website, the Morgan & Co Multi-Sector ETF is an actively managed ETF with the goal of beating the ZSE All Share while boasting a low-cost structure. The ETF aims to earn alpha for investors by taking long positions in fundamentally undervalued sectors. The ETF is benchmarked against the ZSE All Share Index.
As we can see from the image, the constituents of the MCMSETF are FINSEC-listed Old Mutual Zimbabwe Limited, NMBZ Bank, First Mutual Holdings Limited, First Capital Bank, Zimre Holdings limited and financial services conglomerate CBZ Holdings. Initially, the focus is on the Financial and Banking sectors.
Morgan & Co Made In Zimbabwe ETF
The Morgan & Co Made In Zimbabwe ETF is an actively managed fund which primarily invests in Zimbabwean manufacturing companies. Normally, at least 80 per cent of the fund will be invested in Zimbabwe-based manufacturing companies whose revenues are primarily derived from manufacturing processes, while 20 per cent may be invested in companies who fall outside of this scope. Zimnat Asset Management’s manager primarily allocates the fund’s portfolio investments using a proprietary model developed by Morgan & Co.
Morgan & Co’s Made in Zimbabwe ETF has 10 equities for manufacturing firms of different weights. These are: Amalgamated Regional Trading (40.18 per cent), Nampak Zimbabwe (18.48 per cent), Hippo Valley (14.71 per cent), Delta Corporation (417.85 per cent), StarAfrica (3.75 per cent), British American Tobacco (2.42 per cent), Innscor Africa (1.34), and Lafarge Cement (0.56 per cent).
Datvest Modified Consumer Staples ETF
The Datvest Modified Consumer Staples Exchange Traded tracks the performance of the Zimbabwe Stock Exchange listed companies within the consumer staples.
According to a prospectus statement for the Datvest ETF, CBZ Asset Management have initial seed capital in the form of scrip in the exact weights of the ZSE Modified Consumer Staples Index.
The term consumer staples refer to a set of essential products used by consumers. This category includes things like foods and beverages, household goods, and hygiene products as well as alcohol and tobacco.
The counters comprising the Datvest ETF are predominately from consumer stocks such as Delta, Innscor, National Foods, Meikles, Simbisa Brands, OK Zimbabwe, TSL, Dairiboard, and African Distillers.
Cass Saddle’s Agriculture ETF
The ETF, which was listed by introduction, took off with a seed capital of $36 199 404 and became the fifth overall securities listing on the ZSE this year after it was officially registered.
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Cass Saddle is an agri-focused asset management company that is licensed by the Securities and Exchange Commission of Zimbabwe (SECZim). The asset manager offers Institutional Fund Management, Individual Wealth Management, Investment services and advisory.
According to the prospectus, CABS Custodial Services is the ETF custodian; thus, it will hold the assets of the fund, whilst CABS Trustee Services is the trustee.
ZSE chairperson Caroline Sandura said the agriculture sector is well documented as being one of the key pillars of the Zimbabwean economy, contributing an average of 10 per cent to the gross domestic product over the past 5 years and slightly over US$1 billion in export receipts in 2021.
“The agriculture sector also supplies up to 60 per cent of the raw materials required by industry. It is therefore commendable that Cass Saddle Asset Management picked this important sector for their ETF,” she said.
The first 10 counters of the index are National Foods with a weight of 28 per cent, BAT 15 per cent, Tanganda 12 per cent, Hippo Valley 11 per cent, SeedCo nine per cent, TSL nine per cent, CFI eight per cent, Dairibord three per cent, Zimplow and Ariston one per cent respectively and Cash three per cent.
Meanwhile, at the end of the last weekday of trading on the ZSE, a total of 900,500 shares, corresponding to a market value of ZWL 41,042,437.88, were traded. Data shows an 83 per cent decline in volume and 82 per cent decline in turnover. The current market capitalization of the Zimbabwe Stock Exchange is ZWL 1.82 trillion.
The benchmark ZSE All Share Index soared 1,101.20 (10.46 per cent) points to close at 11,629.65, representing a 1-week gain of 12.1 per cent, a 4-week loss of 17.35 per cent, but an overall year-to-date gain of 7.46 per cent.