ETF: The African property ETF

As any South African retailer with high hopes can tell you, doing business in Africa is not without its obstacles. Those who manage to make it work, however, can be richly rewarded.

Cloud Atlas is a boutique South African ETF issuer specialising in access to African markets. In June 2018, the company made it possible for South African index investors to gain access to the African property market through a JSE-listed ETF called the Cloud Atlas AMI Real Estate ex-SA ETF (JSE code: AMIRE). The ETF invests in 20 companies in Egypt, Morocco, Mauritius and Namibia. The majority of properties are in the residential and leisure sectors, followed by retail and office properties. 1.25% of the ETF is invested in industrial properties.

While property investments are often considered lower risk than pure equity, the first 18 months of this ETF’s existence saw its share price swing wildly. Since this ETF is denominated in rands and operating in four different economies, it is highly subject to currency movements, in addition to challenges like liquidity and ease of doing business in African economies. As the name implies, this ETF does not invest in South African real estate companies.

Since 2019, Regulation 28-compliant funds are allowed to allocate an additional 5% to African investments. If you are managing your own Regulation 28-compliant retirement product and hoping to increase your offshore exposure, this ETF and the Cloud Atlas AMI BIG50 ex-SA ETF (JSE code: AMIB50) are worth considering. However, be wary of the volatility of this product. It might reward you in the long-run, but it’ll be a bumpy ride. This is a total return ETF, which means it does not distribute a dividend.

*January 2020

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