Barclays Bank Botswana has proved to be a dominant player in listing exchange traded fund (ETF) instruments, maintaining a big lead on rivals Standard Chartered, Stanbic Bank and First National Bank Botswana.
There are four ETFs listed on Botswana Stock Exchange (BSE), with three of them being listed by Barclays Bank in partnership with its subsidiary, Absa group.
This week, Barclays launched its third ETF on the local bourse, the Inflation-Linked Bond Index Exchange Traded Fund (ILBI ETF). First listed on the Johannesburg Stock Exchange (JSE) in 2012, the listing of the ILBI ETF on the BSE is the first secondary listing and will provide investors in Botswana an opportunity to invest in the de facto South African Government Inflation-linked bond Index while simultaneously increasing the liquidity of the BSE.
The NewGold (which tracks the performance of gold) was the first ETF to be listed on the local bourse which Barclays listed on the BSE in July 2010. Nedbank, a South African bank followed with another ETF BettaBeta. Barclays then listed another ETF, the NewPlat, which tracks the performance of platinum.
Giving a key-note address during the official launch, BSE deputy chief executive officer, Thapelo Tsheole said the as at last week Thursday, a cumulative 30.7 million ETF units had been traded on the stock market, yielding a cumulative turnover of P1.2 billion.
“This is evidence that ETFs have indeed improved the BSE’s product offering and liquidity,” he said.
ETFs are among the fastest growing investment funds, surpassing hedge funds.
He said Barclays has been an active partner in encouraging the growth of the Botswana financial markets.
What is especially pleasing for him is the Barclays Africa Group is supportive of developing the market in Botswana through several listings of Exchange Traded Funds developed within the Group. “As you know, Absa Capital, a member of the Barclays Africa Group, has listed both the Platinum and Gold ETFs on the BSE and this is the third listing of an ETF product by the group,” he said.
Tsheole further noted that the listing of the ILBI EFT will bring value addition and efficiency of capital benefiting the financial sector as trading will occur locally. In addition, he noted that that there are no exchange controls in Botswana, enabling people from around the world to buy the ETF. Barclays Managing Director Reinette van der Merwe said the banking landscape is changing at a very fast pace and that Barclays was rising up to the challenge. “The market has been yearning for such products that allow institutional investors to invest more in local products,” she said. Barclays bank boss said the ETF will reduce the rate at which investors are taking money to offshore investments due to lack of diversity in investment instruments.
She said it will provide investors with a hedge against inflation, and diversifying investment risks. “This is suitable for investors seeking low cost, convenient alternatives to traditional non-listed investments,” she said.
ETFs are among the fastest growing investment funds, surpassing hedge funds. They are considered favorable as they are low cost and have a large range of indices. The Barclays ILBI ETF tracks about 10 bonds.
The ILBI index is a total return index comprising bonds by the South African government that are linked to the South Africa Consumer Price Index (CPI). Inflation linked bonds differ from conventional bonds in that the nominal value of the inflation-linked bond changes in line with the South Africa CPI, and thus the real value of the bond’s notional remains constant. Hence, the ILBI provides a hedge against inflation.