Standard Bank Group is the first local financial services organisation to list and offer retail and institutional investors in South Africa commodity linked exchange traded notes (ETNs). The first release includes the precious metals suite of platinum, palladium, gold and silver linkers. These instruments are listed on the Johannesburg Stock Exchange/JSE main board and are South African rand denominated.
ETNs are debt instruments issued by Standard Bank Group with returns linked to the performance of a specific commodity total return index and have a fixed redemption date. Investors in Standard Bank Group's commodity linker ETNs will earn a return from the performance in the underlying metal's futures price on a fully invested and non-geared basis.
Stuart Leslie, Director, Global Markets, Standard Bank Group, says: "The launch of Standard Bank's commodity exchange traded notes further cements the active and leading role that the bank plays in the commodity market. We strive to provide investors with a wide range of quality investment alternatives to ensure a balanced and rewarding investment portfolio.
"Precious metals exchange traded notes provide investors with affordable access to a new asset class. Standard Bank believes that the new Commodity-Linkers will provide an excellent vehicle for customers to diversify their portfolios. ETNs provide investors with access to an investable form of direct commodity exposure in a liquid and cost effective manner."
Mr Leslie says: "Extensive research has shown that there are distinct advantages of including commodities in an investor's portfolio. Commodities have a tendency to move in the opposite direction to fixed income securities and equities. This provides a valuable stabilising force in any portfolio. In addition to this diversification benefit, the inclusion of commodities can provide a hedge against inflation.
"Commodities have the highest positive correlation with inflation when compared to that of equities and bonds. In order to take advantage of the benefits that commodities offer, investors need an investment vehicle that is cost-effective, liquid and transparent. We believe that Commodity-Linkers will indeed fill this gap."
Standard Bank has committed to making markets in the commodity linkers to ensure that there is a high level of liquidity for investors to take advantage of. The issue price for one ETN is R100. The R100 will translate into a certain percentage of ounces dependent on the price of the underlying commodity future.
The ETNs will reference real time, liquid commodity futures contracts that trade on the main international commodity exchanges. The futures are reliable and transparent with intraday prices widely available. Investors will be able to invest in Standard Bank Group's commodity linker ETNs via their JSE broker.
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