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Cloud Atlas makes its JSE debut

A unique ETF with exposure to 50 African blue-chip companies – Maurice Madiba, Cloud Atlas CEO.

SIKI MGABADELI:  An exchange-traded fund offering 50 African blue-chip companies outside South Africa made its debut on the JSE today. Although the JSE already has two exchange-traded notes – the Standard Bank Africa Equity Index and Deutsche Bank’s MSCI Africa Cap 50 – offering portfolios of African shares, the AMI Big 50 is the JSE’s first Africa-focused ETF.

We speak to the CEO of Cloud Atlas, which manages the fund, Maurice Madiba, who joins us now. Maurice, thanks so much for your time today. Before we talk about the rationale for the listing, let’s start with the business of Cloud Atlas Investing itself. Tell us a bit about yourselves.

MAURICE MADIBA:  Thank you for having me on the show. Cloud Atlas Investing is a newly founded business, Johannesburg based, really looking at  creating a platform whereby South Africans can participate in Africa’s growth – including a safe and easy environment for people to be able to own some of the shares across the continent.

We are a team of four. We’ve got quite an interesting story in terms of how we started. It’s one of those businesses that started in the garage – and today it’s quite a great thing to be listing on the JSE.

SIKI MGABADELI:  Tell us a bit about that. We love those stories.

MAURICE MADIBA:  As you get into financial services it’s a game whereby you are manging a lot of people’s money, so you really have to know the kind of markets and the kind of places where you are putting people’s money. Your process, etc, has to be solid. So we spent a lot of time developing the product itself and then going through all of the regulation that we had to do.

I think an ETF is probably one of the most regulated investment products in South Africa because you not only have regulations from the FSB, you are also regulated by the JSE. And, in addition to those, because it’s a foreign referencing instrument you also are regulated by the Reserve Bank.

SIKI MGABADELI:  And they gave you a dispensation to offer the ETF to institutional investors as well, right?

MAURICE MADIBA:  Yes. That’s something we were very grateful for. It came actually with the previous budget speech this year, and it was talking about how the exchange-control manual was amended so that ETFs can inward list on the Johannesburg Stock Exchange. The team was very kind to us in that we managed to get that done. That was the catalyst to then bring us to today list the ETF.

SIKI MGABADELI:  Let’s talk about the composition of the ETF. What are investors investing in?

MAURICE MADIBA:  You’ve got 15 African markets. I can quickly run through them. The more familiar ones are our neighbours, Botswana and Zimbabwe. As you move further north you’ve got Zambia, Malawi, Uganda, Kenya, Tanzania. Off the coast there is Mauritius and then up north there are Egypt, Tunisia and Morocco. And then in the west of Africa you’ve got Nigeria, Ghana and Ivory Coast – that exchange called BRVN. So there are 15 African markets that you look at trading, including Namibia. It really gives you access to the blue chips that are listed in those different markets, as well as diversity on a sector basis.

So, as much as there is a composition or overweighting towards banks because there are listed banks in every single country, you also have food and beverage, healthcare, retail, real estate, industrials and quite a nice food and beverage mix within the index.

SIKI MGABADELI:  For investors I want to talk about how you are looking to attract retail investors, specifically. The key difference, if I understand it correctly, between ETFs and ETNs is that ETFs can be offered via tax-free savings accounts, which of course are something that government is pushing quite a bit now to get more of us to start to save – whereas ETNs not so much. So what’s your strategy then to attract more and more of those of us who are first-time investors?

MAURICE MADIBA:  It makes it easier and simpler for you to invest. I think an ETF is a nice entry point if it’s your first time investing. In an ETF you get exposure to stocks and you don’t necessarily have to do stock-picking. The difference between ETFs and ETNs is that ETNs actually physically hold the shares within custody and in trust for you.

You own proportionally by buying the ETF. You own proportionally a share of the companies that are within that index that the ETF is tracking. So it makes it quite an attractive option in that whoever wants to know how the companies are performing, how the index is performing, can always look that up.

SIKI MGABADELI:  How did you trade today? How did it go?

MAURICE MADIBA:  It went well. We really enjoyed it. There was a lot of singing at the JSE because ultimately today is the beginning of a new chapter for African financial markets. So it was really a momentous occasion, something that we had to celebrate properly.

SIKI MGABADELI:  One we’ll be tracking as well. Thanks, Maurice. Maurice Madiba is CEO of Cloud Atlas.

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