JOHANNESBURG (miningweekly.com) – Banking group Standard Bank on Wednesday announced that it would launch three exchange-traded funds (ETFs), with an estimated value of R60-billion, on the JSE.

The AfricaGold ETF, AfricaPlatinum ETF and the AfricaPalladium ETF would give investors seeking exposure to the metals alternative, competitively priced investment options, Standard Bank global structuring group head Johann Erasmus said.

AfricaPalladium, which was expected to list later this week, would also be the first palladium ETF to be listed in the local market following a strong demand for the metal.

The AfricaGold and AfricaPlatinum ETFs would be listed at the beginning of April.

Each new commodity ETF would benefit from its own unique guarantee, backed by the actual commodity held by the custodian. The commodities would be inspected on a half-yearly basis to verify the quantity and quality of the commodities held on behalf of investors.

“The ETFs invest directly in palladium, gold and platinum, respectively, and track the rand prices of the metals. This allows investors to invest in liquid listed instruments and, because of the security structure that each ETF has, the investor has no issuer risk or risk of exposure from the other commodities held in the ETFs. Investors gain direct exposure to the commodities, investing in physical palladium, gold and platinum, which are held in vaults,” Erasmus explained.

He further added that, despite pressure on metal prices, it always remained a good time to buy into commodities as a long-term investment.

“Investors seeking exposure to gold, palladium and platinum should take a long-term view when making their investments. Standard Bank is still seeing demand for precious metals and believes that this is the right time to provide investors with other competitively priced alternatives,” Erasmus said.

The commodity ETFs offered investors a different investment class with several benefits, including exposure to the physical commodity and some level of protection from negative real interest rates.

“Regulation 28 of the Pension Funds Act specifically allows for commodity exposure of up to 10% through ETFs and exchange-traded notes. Africa ETF investors will have the option of physical delivery of the metals should they hold the necessary approvals, or alternatively settlement in cash at the equivalent metal value on redemption of the ETF,” Standard Bank said in a statement.

The AfricaPalladium, AfricaGold and AfricaPlatinum ETFs would be treated as local assets and have no exchange control implications for investors.

“These ETFs allow investors to own palladium, platinum and gold and gain exposure to their price movements without the inconvenience and risk of storing physical bars or coins while still having the knowledge that you have a guarantee backed by the physical metal. Each unit will be listed and traded on the JSE, denominated in rand, and has an exposure of 1/100 of an ounce of these metals,” Erasmus said.

He added that the next step, after the ETFs’ debuts on the JSE, would be for Standard Bank to launch the instruments in other jurisdictions as well as grow the product range to accommodate increasing investor demand.