x Abu Dhabi, UAEWednesday 17 January 2018

Two-week suspension for trade of NBAD's ETF during restructuring

National Bank of Abu Dhabi is restructuring its exchange traded fund to bring down costs and plans to switch its benchmark to better appeal to international investors, according to filings published on the bourse yesterday.

National Bank of Abu Dhabi's exchange traded fund (ETF) of UAE equities will be suspended for trading for two weeks next month to complete a restructuring process.

When it resumes trading, the fund will buy equities directly through the market rather than derivatives.

The lender also plans to switch the fund's benchmark from Dow Jones to MSCI.

The restructured fund will track an "index by buying physical stocks as opposed to through a swapagreements," OneShare, the bank's ETF, said in its third-quarter financial report posted on the Abu Dhabi bourse yesterday.

"As required by the local regulator in the UAE, current investors have been given time, up to 8 November, should they wish to redeem their shares."

The ETF, which trades under the ticker 1UAE, will be suspended from trading until November 22, the statement added.

The fund will be relisted on November 25 on the Abu Dhabi Securities Exchange under the same ticker, the bank added.

It has "provided three months' termination notice to Dow Jones" and is "currently working towards competing an agreement with MSCI as the new benchmark provider".

An ETF tracks a basket of stocks or commodities but trades like an individual share.

High expenses and a lack of appetite for the ETF, introduced in April 2010, caused the investment vehicle to report a widened full-year loss of Dh3.06 million (US$833,129), from a loss of Dh726,974 the previous year.

Saleem Khokhar, the head of equities at NBAD said yesterday the recent move was to bring down costs and make the fund more appealing to international investors.

"The swap has been difficult to implement from our side and has been a little bit more costly than anticipated over all," said Mr Khokhar.

The capital raising was "not at the levels for which we had hoped for, which was partly why the restructuring process took place," he explained.

"After speaking to international investors, it was clear that their preference was for MSCI," he added. Mr Khokhar said he was confident the restructured ETF would be "superior" to the product in its current state, and would better cater to the needs of international investors.