Zimbabwe: Morgan & Co to List Tradable Fund

30 December 2021

Morgan & Co Limited is set to introduce a multi-sector exchange traded fund (ETF), which will be listed on the Zimbabwe Stock Exchange (ZSE) by way of introduction early next year.

Morgan & Co said in a statement that the ZSE had already approved the listing of the multi-sector ETF which will list on January 3, 2022.

An actively managed ETF is a form of exchange-traded fund that has a manager or team making decisions on the underlying portfolio allocation instead of tracking the performance of a benchmark index.

" . . . wishes to establish Zimbabwe's first actively managed ETF, which will invest primarily in banks, real estate related firms, insurance and reinsurance companies, industrial and non-industrial companies and financial holdings companies," read part of the statement.

The company said it was now in the process of procuring an initial seed capital in the form of scrip.

"Since this is an actively managed fund, the weights and counters will inevitably be changed over time," said Morgan & Co.

"The fund will then be listed on the ZSE by way of introduction. Additional investments from other investors will be used to buy shares on the market and add to the portfolio," said Morgan & Co.

It noted that investors who wished to invest in the fund could do so through two ways, by buying units in the ETF through any registered broker or alternatively by delivering a basket of stocks through an authorised participant in the prevailing weight of the fund.

Further, the securities company said all assets of the fund would be held by CABS Custodial Services who will act as a custodian of the fund.

Settlement of trades in the units will be done through the ZSE Depository. "This investment offers investors an opportunity to own a mixture of underlying stocks through one investment in the ETF.

"Therefore, the investor does not have any additional tasks or costs over and above those associated with dealing in any other publicly traded security and the fund manager will be responsible for adjusting or maintaining the components of the portfolio. The ETF will be reviewed constantly because it will be actively managed," read part of the statement.

ETFs are baskets of different types of investments such as stocks, commodities and bonds that are pooled into a single entity, which then offers shares to investors that are subsequently traded on major stock exchanges.

The Old Mutual Zimbabwe Stock Exchange Top Ten Index Exchange Traded

Fund (ETF) that was listed on the ZSE in January 2021 became the first ETF to be listed on the platform.

The ETF industry globally ended 2020 with over US$5,5 trillion investments, according to Investment Company Institute statistics.

According to the ZSE prospective exchange traded product issuers will have to prove that the underlying asset or security track is sufficiently liquid to satisfy the exchange such that there will be proper price formation in the product.

Meanwhile, the government, which is desperate for funding solutions in the capital-strapped economy, has thrown its weight behind ETFs.

"There is no reason why we cannot have ETFs to raise capital like they do in Botswana," Finance Minister Professor Mthuli Ncube told a business conference early in the year.

Business and the government have both been finding it difficult to source capital due to the country's currency crisis, characterised by raging inflation.

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