By Dipo Olowookere
The importance of the Exchange Traded Products (ETPs) market to the nation’s economy and the capital market has been emphasised by the Chief Executive Officer (CEO) of the Nigerian Stock Exchange (NSE), Mr Oscar Onyema.
In his address on Wednesday at the 2018 Exchange Traded Products Conference in Lagos, Mr Onyema said since the introduction of ETPs in1993, they have gained widespread acceptance in most developed markets.
According to him, ETPs are one of the most significant financial innovations in recent decades and have shaped the financial markets.
At the event tagged Exchange Traded Products: Evolving Investment Themes, Accessing New Markets and Enhancing Portfolio Alpha, the NSE chief over the last 15 years, investors’ demand for ETPs (both retail and institutional) has grown remarkably, which in turn has led to a greater variety of products offered by ETP sponsors.
Speakers at the conference were two of the most recognized ETF strategists out of Europe and Africa; Ms Debbie Fuhr and Mrs Nerina Visser as well as a carefully selected panel of thought leaders across Africa’s investment management industry.
The event was to expand the discourse on ETPs in terms of enhancing domestic capacity as well as improving collaboration amongst participants in the ecosystem – product strategists, issuers, intermediaries, advisers, investment managers and investors.
Mr Onyema said, “Globally, ETPs have grown remarkably this year recording net flows of approximately $358 billion as at October 2018.”
He added that according to ETFGI, the Global ETP industry had close to 15,000 ETPs listings on 71 exchanges with assets of about $5 trillion cutting across 392 providers at the end of October 2018.
The NSE boss noted that equity-based ETPs make up 76.7 percent of global ETP listings whilst Fixed Income based ETPs represent 16.7 percent of listings, similar to the asset split in Nigeria. The cross-listing of ABSA’s Newgold ETF on the NSE in December 2011, opened up the ETPs market.
“Since then, the ETPs space has grown steadily by a cumulative average growth rate of 8 percent over the last 4 years.
“Currently, there are 9 ETPs listed on the Exchange; 2 thematic ETFs providing access to Pension-compliant and Shariah-compliant stocks, 2 broad equity market ETFs tracking the NSE 30 Index, 3 sector based ETFs, 1 commodity ETF, and one bond ETF tracking exposure to benchmark FGN Sovereign Bonds.
“The introduction of ETPs is one of the Exchange’s strategies to enhance diversification as well as broaden the options available in the capital market to support the efficient implementation of investment strategies across diverse asset classes and instruments,” Mr Onyema said.
Speaking further, he encouraged “ETP product issuers and intermediaries to expand their footprint by broadening distribution channels, introducing other asset classes/strategies, entering new markets, leveraging technology and data analytics to understand the market and demand.”
He said, “This year, in collaboration with issuers, we have focused on diversifying the ETPs space by supporting new product development and thus expect the launch of new ETPs in the short term.”
Business Post reports that the conference was aimed at providing insights on emerging themes as well as foster understanding of ETPs as convenient vehicles and investment management tools for accessing other markets. Discussions were mainly focused on ways to identify solutions to challenges in the domestic market, as well as consider the potential for cross border listing of securities in Africa; expand the dialogue regarding the integration of African Financial Markets via the issuance of ETP vehicles and depository receipts; provide the investment advisory and broker-dealer community with an understanding of their roles in distribution and capital mobilization, as well as Provide direction to ETP Issuers to support product development efforts in the medium term.
Adedapo Adesanya