CBZ to introduce exchange trade fund

CBZ Asset Management says it will introduce an exchange trade fund (ETF) tomorrow, which tracks the Zimbabwe Stock Exchange (ZSE) modified consumer staples index.

This comes as the Securities and Exchange Commission of Zimbabwe (SecZim) acting chief executive Gerald Dzangare said recently that the market expected at least three ETFs to list this year.

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.

According to a prospectus statement for the Datvest ETF, CBZ Asset Management will have initial seed capital in the form of scrip in the exact weights of the ZSE Modified Consumer Staples Index.

The term consumer staples refers to a set of essential products used by consumers.

This category includes things like foods and beverages, household goods, and hygiene products as well as alcohol and tobacco.

Zimbabwe Stock Exchange told the investing public it would introduce the Modified Consumer Staples Index (MCSI) with effect from 01 September 2021.

"The fund will then be listed on the ZSE by way of introduction on Thursday 3 March 2022. Additional investments from other investors will be used to buy shares on the market and add to the portfolio," said the statement.

The company said investors who wish to invest in the fund could do so through two ways; buying units in the ETF through any registered stockbroker or alternatively investing in kind by delivering a basket of stocks in the exact weights of the fund through an authorised participant.

According to the prospectors, all assets of the fund will be held by CBZ Custodial Services who will act as custodian of the fund while Stanbic Bank Zimbabwe will be the trustee.

Additionally, settlement of trades in the units will be done in electronic format in accordance with the settlement modalities approved by the Zimbabwe Stock Exchange.

"This investment offers investors an opportunity to own the underlying stocks on the ZSE Modified Consumer Staples Index through one investment in the Datvest MCSI 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," said Datvest.

It is said that the fund manager will be responsible for periodically replicating the ZSE Modified Consumer Staples index in line with the index Ground Rules and currently the ZSE Modified Consumer Staples index is reviewed once a quarter in line with all the other indices

The prospectors noted that efficient Investing in Datvest Modified Consumer Staples ETF Securities represents a more efficient way of tracking a given benchmark compared to investing in a basket of individual stocks.

"Firstly, settlement charges that are levied per deal note are minimised by doing one transaction when buying or selling the ETF compared to multiple orders for the various underlying securities.

"Secondly, the outflow required to get exposure on the ETF is minimal compared to having to buy the individual underlying securities," Datvest said.

ETFs are passively managed, fully funded (unleveraged) open ended funds which track the performance of a specified security which include but are not limited to indices, commodities, currencies or any other asset.

The Datvest Exchange Traded Fund will become the third ETF enlist on ZSE after Old Mutual unveiled a similar product in January last year and Morgan & Co listed its multi-sector fund two months ago.