x Abu Dhabi, UAETuesday 25 July 2017

NBAD prepared for long haul on ETF fund

NBAD's OneShare exchange traded fund reports widened loss for last year to Dh3.06 million amid high expenses and lack of appetite for the recently introduced investment vehicle.

Investors had little enthusiasm for National Bank of Abu Dhabi's exchange-traded fund (ETF) last year.

High expenses and a lack of appetite for the recently introduced OneShare Dow Jones UAE 25 ETF caused the investment vehicle to report a widened full-year loss of Dh3.06 million, from a loss of Dh726,974 the previous year. The fund was launched in April 2010.

An ETF tracks a basket of stocks or commodities but trades like an individual share. In this case, the OneShare ETF includes the top 25 publicly traded companies in the UAE. "Because the ETF is still at an embryonic stage, the fixed costs for running that fund are quite high," said Saleem Khokhar, the head of equities at NBAD and a director at the ETF. "We are willing to ride out the expenses until it grows in terms of size."

One of the main attractions of ETFs in the region, in theory, is that they allow institutional traders to take larger positions without being constrained by the limits set by bourses on the number of shares investors can buy in a single day.

But most bigger investors left regional markets after the global financial crisis.

An ETF can also allow smaller investors to gain exposure to a broader index without having to buy a variety of individual shares. But for retail investors, who prefer to manage their trades by themselves, buying into the fund is more expensive than an individual share.

An investor will still have to pay a fee of 27.5 basis points to a broker, on top of the annual fee of 99 basis points for the fund.

Performance of the ETF was weak last year, after the Arab Spring and Europe's ongoing debt crisis dampened investor sentiment. The fund was down 16.7 per cent, bringing its total decline since inception to 19.7 per cent.

The Abu Dhabi Securities Exchange General Index and Dubai Financial Market General Index, the country's two main indexes, lost 11.6 per cent and 16.9 per cent, respectively, last year.


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