For many years, South Africans hoping to gain access to the African growth story had to rely on indirect investments through companies that do business on the rest of the continent. In 2017 Cloud Atlas changed all that by introducing the AMI Big50 Ex-SA ETF (AMIB50). A year later, the company also introduced a property play in the Cloud Atlas AMI Real Estate ex-SA ETF (AMIRE). With these two ETFs, Africa is at your fingertips.
The Cloud Atlas equity ETF invests in the 50 most representative listed companies in Africa, excluding South Africa. It is the first index-tracking product in the market that offers exposure to the continent without relying on the South African economy. It’s also the only ETF that offers access to emerging economies in Africa, excluding South Africa.
The ETF invests in 12 economies across the continent, with Morocco, Egypt, Nigeria, Kenya and Zimbabwe taking up most of the exposure. Companies listed on the BVRM stock exchange, the collective exchange of the West African Economic and Monetary Union, are also contained in the ETF. That exchange represents the economies of Benin, Burkina Faso, Côte d’Ivoire, Mali, Niger, Senegal, Togo and Guinea-Bissau. In total, investors have access to 16 African economies through this ETF.
The ETF leans quite heavily on the banking sector, with 31% exposure. Egypt’s Commercial International Bank has a 12.0% representation in the index, but Moroccan telecom Itissalat Al Maghrib continues to hold the top position in the index. Telecommunications companies make up just over 20% of the index. While fewer economies are represented in the index than the initial 16, some of the concentration risk seems to have eased off. Food and beverage companies and industrial companies combined take up 20.5%. Just under 7% of this ETF is invested in real estate, which is something you should keep in mind if you also buy the AMIRE.
The AMIB50 is weighted by market capitalisation and dividends issued are reinvested into the ETF. Upon listing, this ETF was the most expensive ETF on the market. However, the cost of managing the ETF has come down significantly over the past two years. You can hold this ETF at a very reasonable 0.7%. This fee might reduce further in the future as it becomes easier to do business on the continent.
When economies grow, demand for office space increases and people moving to economic centres need accommodation and places to shop. In beautiful countries that attract a lot of tourism-think Egypt and Morocco-tourists need places to stay. Investing in African property gives you access to increased demand in growing economies. The Cloud Atlas AMI Real Estate ex-SA ETF invests in 12 listed real estate companies in Egypt, Morocco, Mauritius, Botswana and Namibia. The vast majority (over 60%) of this ETF invests in residential and tourism properties with a 31.62% exposure to retail properties.
As with all ETFs, this ETF will continue to follow the money across the continent in the background. Should property no longer be a viable sector in one economy, the ETF will automatically kick out underperforming economies and include those on the rise.
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