SOUTH AFRICAN FIRM TO FLOAT GOLD-BACKED ETF IN NIGERIA
BY MICHAEL EBOH
A SOUTH African firm, ABSA Capital, in partnership with Vetiva Capital Management Limited, is set to float a gold-backed Exchange Traded Fund, ETF, on the Nigerian Stock Exchange, NSE.
The gold-backed ETF called NewGold, according to both companies, will give investors on the NSE the opportunity to invest, own and trade in gold when the fund is listed.
Speaking at a training programme on ETFs organized by the NSE and ABSA in Lagos, Batsile Ngomane, Associate Principal, Investment, ABSA Capital, said that Nigerian investors will enjoy the enormous opportunities presented by the soon-to-be listed product.
She said investors in the fund will indirectly own gold bars in form of debentures, with assurances on safety of their funds.
She further stated that the NewGold ETF, presents an opportunity for investors to invest directly in gold bullion, especially as the fund tracks the price of gold in the global market.
According to her, each NewGold security, which is also listed on the Johannesburg Stock Exchange, JSE, is equivalent to approximately 1/100 ounces of gold bullion, held in a secure depository on behalf of investors.
'Accordingly,' she said, 'each security is backed by physical gold and the value of a NewGold ETF security will appreciate or depreciate in accordance with the fluctuations in the price of gold bullion.'
Also speaking on the structure of the fund, Mr. Damilola Ajayi, Head, Wealth Management Division, Vetiva Capital said the fund will trade like any other security, while the trading dynamics will be based on the price of gold, exchange rate fluctuation and information-driven.
He said the fund will be different from previous cross-border listings, due to the fact that ABSA Capital will serve as a liquidity provider for the fund, providing the necessary liquidity and activity in the fund.
He explained that NewGold will trade continuously on the NSE throughout the trading session, as liquidity in the fund is guaranteed.
He, however, said that to address demand and supply imbalance, ABSA will, through Vetiva, intervene periodically in the trading of the funds, thereby, ensuring continuous buying and selling.
'ABSA acting as a market maker presents two advantage to the fund - pricing transparency and pricing efficiency,' he noted.
Ajayi further noted that the value of the fund will be determined by the price of gold in the global market and the exchange rate of the Nigerian currency against the dollar.
Speaking in the same vein, Adeboye Gbadebo of ABSA Capital, said NewGold is a special purpose investment vehicle, structured in a manner that ensures that the fund is not tied to the solvency or insolvency of ABSA, due to the fact that the fund owns actual gold bars in a warehouse by its custodian.
He said the fund provides investors with a number of advantages, ranging from portfolio diversification, transparency, increased liquidity, lower cost and investors' protection.