Standard Bank Group will on 24 March list South Africa's first listed palladium exchange traded fund that caters to all investors taking a long-term view on the Johannesburg Stock Exchange. In addition to the AfricaPalladium ETF (exchange traded fund), the AfricaGold and AfricaPlatinum ETFs are expected to list at the beginning of April.
Johann Erasmus, Head of Global Structuring at Standard Bank Group, says the introduction of the three ETFs to the local market means that investors seeking exposure to the metals will now have alternative investment options that are also competitively priced. The EFT market in South Africa is valued at an estimated R60-billion.AfricaPalladium is the first palladium ETF to be listed in the local market following strong demand for the metal.
Standard Bank Group was the first bank to list local ETNs (exchange trade notes) on the Johannesburg Stock Exchange in 2010 with the launch of ETNs that track the performance of gold, platinum, palladium and silver followed by the Africa Equity ETN.
Having recently secured regulatory approvals and long standing local sourcing arrangements with suppliers, it has now expanded its offering to include exchange traded funds (ETFs) on the precious metals.
Each new commodity ETF benefits from its own unique guarantee, backed by the actual commodity held by the custodian. The commodities are inspected on a semi-annual basis to verify the quantity and quality of the commodities held on behalf of investors.
"The ETFs invest directly in palladium, gold and platinum respectively and track the rand prices of the metals. This allows investors to invest in liquid listed instruments and because of the security structure that each ETF has the investor has no issuer risk or risk of exposure from the other commodities held in the ETFs. Investors gain direct exposure to the commodities, investing in physical palladium, gold and platinum, which are held in vaults," says Mr Erasmus.
Standard Bank Group has been a key player in the local and global gold, platinum and palladium bullion markets for many years and is one of only four Fixing members of the London Platinum and Palladium Market.
Mr Erasmus believes that despite pressure on metal prices, it is always a good time to buy into commodities as a long term investment. "Investors seeking exposure to gold, palladium and platinum should take a long-term view when making their investments. Standard Bank is still seeing demand for precious metals and believes that this is the right time to provide investors with other competitively priced alternatives," he says.
The commodity ETFs offer investors a different investment class with several benefits including exposure to the physical commodity, some level of protection from negative real interest rates. Regulation 28 of the Pension Funds Act specifically allows for commodity exposure of up to 10 % through ETF's and ETN's. Africa ETF investors will have the option of physical delivery of the metals should they hold the necessary approvals, alternatively settlement in cash at the equivalent metal value on redemption of the ETF.The AfricaPalladium, AfricaGold and AfricaPlatinum ETFs will be treated as local assets and have no exchange control implications for investors.
Mr Erasmus says: "These ETFs allow investors to own palladium, platinum and gold and gain exposure to their price movements without the inconvenience and risk of storing physical bars or coins while still having the knowledge that you have a guarantee backed by the physical metal. Each unit will be listed and traded on the JSE, denominated in rand and has an exposure of 1/100 of an ounce of these metals."Mr Erasmus says the next step after the ETFs' debut on the JSE would be for Standard Bank to launch the instruments in other jurisdictions as well as grow the product range to accommodate growing investor demand.
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