Absa Capital launches South Africa’s first multi-asset exchange traded funds

MAPPSTM offer exposure to equities, bonds, cash and money market through a single listed ETF

Absa Capital, the investment banking division of Absa Bank Ltd, continues to pioneer the local Exchange Traded Fund (ETF) market with the introduction of South Africa’s first multiple asset class ETFs.

Unlike traditional ETFs, that offer exposure to only one asset class, the groundbreaking NewFunds Multi-Asset Passive Portfolio Solutions (MAPPS^TM) allow investors to invest in, and passively track the performance of a portfolio of equities, government nominal bonds, government inflation bonds and cash - all through the purchase of a single ETF on the Johannesburg Stock Exchange.

Vladimir Nedeljkovic, Head of Investments, at Absa Capital said: “MAPPS^TM ETFs offer investors a simple, transparent and cost-effective multiple asset class pre-retirement solution. They combine all the benefits of unit trusts with the low cost, ease of purchase and instant pricing benefits of ETFs.”

On May 24, 2011 Absa Capital will be listing two MAPPS^TM ETFs:

• The more conservative NewFunds MAPPS^TM Protect contains a portfolio of domestic equities weighted at 40%, government nominal bonds at 15%, government inflation-linked bonds at 35% and cash at 10%.

• The NewFunds MAPPS^TM Growth Fund, which targets higher real returns and will typically exhibit greater volatility than the NewFunds MAPPS^TM Protect, will hold a portfolio of domestic equities weighted at 75%, government nominal bonds at 10%, government inflation linked bonds at 10% and cash at 5%.

Liability driven investment manager, Colourfield Liability Solutions (Pty) Ltd provided input into the optimal asset allocation for the MAPPS^TM portfolios.

Nedeljkovic added that the MAPPS^TM portfolios avoid an additional layer of costs, inherent to an alternative method of gaining diversification across asset classes, by using single-asset ETFs as building blocks.

Furthermore, Nedeljkovic noted that before the creation of the NewFunds MAPPS^TM portfolios, an investor wanting to access similar products would normally pay asset management, and often also multi-manager and consulting fees. This makes it an expensive and return-eroding investment.

“The NewFunds MAPPS^TM product suite has a sliding scale fee structure starting at just 0.8% per annum dropping to 0.2% per annum for larger investments,” said Nedeljkovic.

Another advantage is that the NewFunds MAPPS^TM are fully transparent as opposed to active solutions which tend to only disclose their top five to 10 holdings.

The NewFunds MAPPS^TM are Regulation 28 compliant.