Johannesburg — SOUTH African investors will from next month have the opportunity to put money into a product that will track platinum, gold, silver and palladium prices when Standard Bank lists exchange-traded note products on the JSE.

Exchange-traded notes differ from the existing NewGold exchange-traded funds, which is an Absa product and is backed by physical gold. In SA, 49,13 ton s of gold worth 1,828bn are held by the NewGold exchange-traded funds.

Standard Bank said yesterday it had been told by clients they wanted a product that gave them exposure to precious metals, and that regulatory changes might be coming to the Pension Fund Act that would allow pension funds to hold these types of investment instruments.

"It's a more cost effective and efficient mechanism to get commodity exposure," said Stuart Leslie, the director of structured solutions and credit derivatives at Standard Bank.

This exchange-traded note was a Standard Bank debt instrument, meaning the investor would take on Standard Bank risk and the investor would receive the underlying performance of total return on a particular commodity, Mr Leslie said yesterday.

"It's purely based on the derivative markets. We hedge in the futures contracts, so it's effectively an investment in the futures contract that will give the performance of a particular commodity," he said. "It's a fully collateralised debt instrument that is really a long-only, passive type investment."

He conceded that an education programme would have to be run to inform investors exactly what exchange-traded notes were once they were launched on August 10.

The product will be hedged on the New York Mercantile Exchange, the world's largest physical commodity futures exchange. Exchange-traded notes are a new financial product that was first launched by Barclays Bank in 2006.

The precious metal exchange-traded note would be more cost effective because it does not have embedded costs like the exchange-traded fund does, Mr Leslie said.