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 Absa Capital, Plexus launch South Africa’s first sector eRAFI™ 

 

Industrial 25, Resource 20 and Financial 15 eRAFI™ to list on 15 June

In yet a further innovation for the local Exchange Traded Fund (ETF) market Absa Capital, in partnership with local investment manager Plexus Asset Management, today announced that they will be listing South Africa’s first sector ETFs based on the groundbreaking eRAFI™ methodology. It weights shares based on fundamental valuation metrics.

Three new ETFs – eRAFI™ SA Industrial 25, eRAFI™ SA Resource 20 and eRAFI™ SA Financial 15 - will simultaneously list on the JSE on June 15.

This issuance follows the successful JSE listing last year of South Africa’s first eRAFI™ ETF by Absa Capital, South Africa’s leading originator of ETFs, also in partnership with Plexus Asset Management.

Dr Vladimir Nedeljkovic, Head of ETFs and Index Products at Absa Capital, said that sector ETFs will allow institutional and private investors to invest in the best companies in the industrial, resources and financial sectors at a very low cost based on proven valuation criteria.

“Stocks are weighted on six measure of economic value: book equity value; cash flow; sales; gross dividends; net operating assets; and the debt coverage ratio. Portfolios are rebalanced quarterly.

According to Nedeljkovic by avoiding the inherent valuation bias of capitalisation weighting of other ETFs, eRAFI™ strategies over the long run outperform market capitalisation weighted index strategies, at lower risk levels.

Paul Stewart, Managing Director of Plexus Asset Management who hold the eRAFI™ licence in SA, believes that the eRAFI™ methodology is rapidly growing in popularity across the world because of the advantages fundamental index trackers have over traditional methods of indexing.

“The eRAFI™ methodology overcomes the inherent problems with the market capitalisation method of indexing in that it overweights stocks that are overvalued in the market and underweights stocks that are undervalued – the opposite of good investment practice,” said Stewart.

Stewart also noted that private and institutional investors - especially pension funds - are increasingly warming up to the advantages of passive index trackers.

“We expect that there will be a proliferation in both the number of ETFs listed on the JSE as well as the amount of money invested in these products over the next few years and we want to ensure South Africans have access to the best international products and thinking,” said Nedeljkovic.

All eRAFI™ ETFs are open ended, structured as portfolios within NewFunds Collective Investment they are listed on the JSE and can be traded anytime during normal trading hours.

ENDS…

Note to the editor:

About Absa Capital
Absa Capital, a division of Absa Bank Limited (Absa) and affiliated to Barclays Capital, is a leading South African investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.

About Absa Capital ETFs and Index Products

Absa Capital is a leading originator of exchange traded funds (ETFs) in the South African market. The firm listed and operates:

  • NewRand, the first ETF in South Africa based on a proprietary investible index (the NewRand Index, comprising rand hedge stocks with the highest correlation with the Rand/USD exchange rate)
  • NewGold, the first and only gold ETF in South Africa as well as the largest ETF in the SA market with [R8.1] billion in assets under management.
  • NewSA, the first ETF that tracks the empowerments status of South Africa’s Blue Chip corporates
  • eRAFI™ ETF, the first ETF in South Africa using an innovative enhanced fundamental indexing approach to portfolio construction.
  • Shari’ah Top 40 ETF, the first Shari’ah compliant ETF in South Africa.
Absa Capital ETFs are listed on the JSE Ltd and can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the FTSE/JSE Top 40 Index, a market sector such as resources or financials, or a commodity such as gold.

etf.absacapital.com

About Plexus Group

Established in 1995, the Plexus Group of companies is an independent investment house that specialises in asset management, investment consulting and the management of multi-manager investment solution for corporate and individual clients.

Enhanced Research Affiliates Fundamental Index™ (eRAFI™) approach to portfolio construction was pioneered by California-based Research Affiliates. .Plexus Group has been awarded an exclusive licence to implement and distribute products based on the eRAFI™ methodology in the Pan-African region.

Issued by:
FD Beachhead
Grant Henry
+27 11 214 2406
+27 82 561 7172
grant.henry@fd.com

For further information contact
Dr Vladimir Nedeljkovic
Head of ETF’s and Index Products
Absa Capital
+27 11 895 5367

Paul Stewart,
MD Plexus Asset Management
+27 21 970 2400

Graeme Coetzee
Associate Principal
Marketing and Corporate Communications
Absa Capital
+27 11 895 6695
+27 79 695 9798
graeme.coetzee@absacapital.com
Copyright 2013 Corporate and Investment Banking, Absa. All Rights Reserved. Corporate and Investment Banking is a division of Absa Bank Limited, Reg No. 1986/004794/06. Authorised Financial Services Provider. Registered Credit Provider Reg No NCRCP7.