An Africa Business Community
Johann Erasmus, Standard Bank Group's Director of the Global Structuring Group, says: "Exchange traded notes have really given us the opportunity to provide our retail andinstitutional clients with access to markets and products that they have nothad access to in the past. While the ETN and ETF market in South Africa is largely still in its infancy, we have seen tremendous growth in other markets. The global ETF/ETN market is worth an estimated USD 1,542 billion with 7,610 listings world wide as at March 2011".
"In South Africa we have seen a steady increased interest in passive investment products, which has lead to a host of new ETNs being listed on the JSE. Most of theseprovide investors cost effective access to securities or indices which historically were difficult to access, or required that investors access the underlying security in the international market."
Historical back testing carried out by Standard Bank Group's research department shows high correlation levels between the Standard Bank Africa Commodity Index and South African inflation, with housing and utilities, food and non alcoholic beverages and transport making up large portions of the inflation basket, all which have a base derived from commodities.
Mr Erasmus says: "Passive products like ETNs are different from active managed portfolios in that they don't outperform the benchmarks, but they will always guarantee the performance of the benchmark underlying regardless of the economic environment. This is the reason that they are attractive investments. Additional benefits are their low costs, liquidity and depending on the benchmark, provide investors entry to otherwise hard to access securities."
The Standard Bank Africa Commodity Index ETN is the 10th ETN launched by Standard Bank reflecting the Bank's strong presence in the local ETN market. The launch of the Commodity Index ETN follows the successful launch of a suit of single commodity ETNs as well as the Standard Bank Africa Equity Index ETN.
As at end of July 2011, the respective year to date performance of the longer listed ETNs were silver: 32.83%; platinum: 4.76%; palladium: 3.75%; and gold: 15.96%.