Further cementing its position as the leading provider of exchange traded products in South Africa, Absa Capital, the corporate and investment banking division of Absa Bank Ltd (Absa), and affiliated to Barclays Capital, today listed five new Exchange Traded Notes (ETNs) on the JSE.
“The ETNs listed today under the NewWave ETN Programme, are designed to provide investors with an investment opportunity to access the returns of different assets or market indices, and represents the further development of Absa Capital’s overall exchange traded product offering,” said Dr. Vladimir Nedeljkovic, Head of Investments at Absa Capital.
Of the five ETNs, established under the programme, two are precious metal ETNs referencing the spot price of platinum and silver. The remaining three, currency ETNs, are designed to provide investors with access to a liquid investment in the specified reference currency (euro, pound and dollar).
“The precious metal ETNs will enable investors to gain exposure to a return from investing in platinum or silver without the necessity of directly trading and storing the metals,” said Nedeljkovic.
The spot price of precious metals, like silver and platinum, is the price of the precious metal for immediate delivery. When buying an instrument that is linked to the spot price of a precious metal, an investor obtains exposure to the floating price of the precious metal.
“It is as if the investor is physically holding the precious metal, but without having to store it. If the price of the precious metal goes up or down, the value of the ETN will also go up or down,” added Nedeljkovic.
NewWave Currency ETNs are similar to having a currency deposit account with a financial institution, and buying currency exposure is now as easy as buying equities on the JSE.
“International currency is the largest and most liquid asset class in the world. And yet, most investors have zero direct exposure to currency in their portfolios,” said Nedeljkovic. “NewWave Currency ETNs are opening up the currency market to retail investors.”
According to Leanne Parsons, Director: Equity Market at the JSE, South Africa’s financial markets, in the past years, have seen a rapid increase in the number and variety of exchange traded products available to investors. ETNs were introduced into the exchange traded product range in 2010 with five ETN listings. The number of ETNs grew to 15 by the end of 2011.
“Exchange traded products are the perfect entry point to stock exchange investment for the small private investor and increasingly we are seeing them used as specialised tools by institutional investors in the creation of complex investment products,” said Parsons.
“The listing of Absa Capital’s five new ETNs, will offer investors effortless exposure to the major currencies and well known commodity asset classes, and we are pleased to be working with Absa Capital to bring new products to the market which provides investors with exposure to a wider selection of asset classes,” added Parsons.
The main difference between ETFs and ETNs is that ETNs are notes issued by a bank and therefore has an element of credit risk.
Note to the editor:
About Exchange Traded Notes (ETNs)
Exchange Traded Notes (ETNs) are designed to provide investors with an investment opportunity to access the returns of market benchmarks or strategies. ETNs are not equities or index funds, but they do share several characteristics with these. For example, ETNs are listed on an exchange and similar to index funds, they are linked to the return of a benchmark index or price.
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About Absa Capital
Absa Capital, a division of Absa Bank Limited (Absa) and affiliated to Barclays Capital, is a leading South African corporate and investment bank with global reach, offering clients financing, risk management and advisory solutions in a wide range of currencies and structures across the globe.
Absa Capital is a leading provider of ETPs in the South African market and is credited for several innovations and market-firsts in the space, including the first ETF based on a customised, equally weighted index (NewRand), the first commodity backed ETF in South Africa (NewGold), the first family of ETFs based on fundamental indexation (eRAFI™), as well as the first and only family of multi-asset ETFs in SA (MAPPSTM).
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