BettaBeta ETF tops financial market returns
Brian Benza | Wednesday May 21, 2014 14:40
The BettaBeta tracks the performance of the FTSE/JSE Top 40 Index, which itself consists of the top performing global companies across sectors such as industrial, resources and financials. Each BettaBeta share represents a stake in the performance of each of the top 40 companies, which include Anglo America, Old Mutual, Investec, MTN, SABMiller, BHP Billiton and others.
According to Nedbank Capital’s head of Beta Solutions, Nerina Visser the local ETF share price, which listed at P32 in 2011, has grown by over 30 percent to outperform returns of other financial instruments such as stocks, bonds and cash investments.
The BettaBeta ETF closed Wednesday’s trading at P42.35. Taking into consideration the 12 quarterly dividends paid since its listing, the ETF has offered Botswana investors a total return of 13.5 percent per annum.
“This performance compares very favourably with other investment opportunities available to both institutional and retail investors in Botswana,” said Visser.
In the period, the BSE Domestic Companies Index (DCI) increased by 8.7 percent per annum, excluding dividends while the BSE Composite Bond Index gained 9.8 percent annually in a three-year period. The Government and Corporate Bond Indices offered 10 percent per annum and 9.5 percent respectively.
On the other hand, returns on cash investments in the form of Bank of Botswana Certificates (BOBC) have dwindled over the period. The BOBC rate has halved from just over 6.6 percent to under 3.3 percent during the same period, thereby putting significant pressure on investors to seek inflation-beating returns elsewhere. BSE only other ETF, Absa Capital’s NewGold has firmed by about 17 percent from P92.45 at its listing in 2010 to close Wednesday trading at P108.60.
The property market is the only investment vehicle to outperform the BettaBeta with the Investment Property Databank (IPD) estimating property returns to have been around 18 percent in 2012 alone.
In addition to the good returns achieved, Visser said that the BettaBeta ETF brought with it diversification and liquidity to the Botswana bourse. “The correlation between the BettaBeta share price and the DCI was marginally negative over this three year period – this means that the ETF offered local investors an investment that performed very differently from their local offering, often gaining during a period when the local market was in decline, and vice versa. In investment terms, this is a great risk diversifier to reduce the relatively high risk associated with stock market investments,” she said.
On liquidity, Visser said that one of the most important differentiating features of trading an ETF compared to trading an ordinary share, is that there is a market maker for the ETF. The market maker ensures that there is always both a bid and an offer, in line with the Net Asset Value (NAV) of the ETF, available during the trading day. “In a market that struggles to offer sufficient tradability in its ordinary shares, this is a powerful mechanism to improve liquidity,” she said.
Nedbank’s BettaBeta is primarily listed in Johannesburg where its NAV fluctuates daily in line with changes in share prices of underlying assets being tracked. The market maker in South Africa monitors the movements and communicates prices in pula terms to his local counterpart at the opening of trade here.
The BSE is gearing up to launch a platinum ETF, which will give investors the opportunity to invest in physical platinum, a metal whose investment appeal is fast rising. When launched by its sponsor, Absa Capital, the NewPlat ETF will be the third ETF on the BSE. The NewGold, also owned by the Absa, debuted in 2010.