Abu Dhabi investors will soon get the chance of doing good and doing well with a fund that will raise money for the fight against Aids and other diseases. National Bank of Abu Dhabi announced plans yesterday to launch an exchange-traded fund (ETF) with the Global Fund to Fight AIDS, tuberculosis and malaria, a public-private partnership that collects and disburses resources to prevent and treat the diseases. The ETF is expected to be listed on the Abu Dhabi Securities Exchange (ADX) in about three months.
Investors will be able to buy shares of the ETF, which plans to hold the stock of blue-chip companies. The holdings have not yet been determined. The Global Fund and NBAD will then share the fees from the ETF. "We are confident that this ETF will meet the asset allocation criteria of institutional investors and at the same time give the opportunity to do some social good," said Robert Filipp, the head of innovative finance at the Global Fund.
Ethical indexes, such as the FTSE4Good in the UK, commonly select their underlying companies on strict ethical criteria. As a result, they invest only in companies that have missions such as environmental sustainability or the defence of human rights. Investors in this ETF will be able to put their money in companies that are not set up specifically for doing good. "All of this is based on the idea that investors would not be penalised for doing good," said Leonard Lerer, a partner at Sudarskis and Partners, a private equity fund-of-funds company that has been advising on the new product.
"The problems with sustainability indexes is that their underlying indexes are motivated by doing good. They have not attracted the general interest of investors," Mr Lerer said. ETFs are new to the region. It was only three weeks ago that NBAD launched the NBAD OneShare Dow Jones UAE 25 ETF, which was listed on the ADX. Saudi Arabia has also just introduced its first ETF. ETFs are listed on stock markets, so they allow investors to trade a fixed bundle of stocks in real time.
Unlike conventional funds, which usually require hefty entry and exit fees, ETFs allow investors to get in and out easily and more cheaply. The Global Fund expects to receive "an equitable" portion of the licence and management fees generated by the ETF, Mr Filipp said. Exact terms have not been worked out, but the ETF's fees are expected to be less than 100 basis points, or 1 per cent. "We will be launching this ETF to support an organisation with an outstanding track record in financing the fight against the worlds most menacing diseases," said Michael Tomalin, the chief executive of NBAD.
So far, the Global Fund has approved funding of US$19.3 billion (Dh70.88bn) for more than 572 programmes in 144 countries. @Email:email@example.com