Why you should consider investing in UAE-listed ETFs
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Why you should consider investing in UAE-listed ETFs

Why you should consider investing in UAE-listed ETFs

Amid rising interest, the future of exchange-traded funds within the region looks promising, opines Sherif M Salem, CIO – Public Markets at Chimera Capital

Sherif M Salem, CIO – Public Markets at Chimera Capital

What are the key benefits of investing in locally listed ETFs?
In the past, investing in UAE stock markets meant buying stocks, but now you can buy an index. Exchange traded funds provide investors with a liquid and cost-effective investment tool that offers a balanced and diversified exposure to UAE-listed stocks through a single trade. And it can be traded on the stock market, just like a stock. But an ETF can also be traded in the primary market, and if there isn’t ample demand or supply, an authorised participant (AP) can create or redeem units to satisfy investor’s orders.

Additionally, like stocks, investors can track the price of the ETF through its INAV (indicative net asset value) on the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) during the trading day, and the ETF’s holdings are published daily on the Chimera website. It is a highly regulated product and provides investors with an investment tool to access the market quickly and efficiently.

Can you tell us about the Chimera S&P UAE UCITS ETF you launched earlier this year?
It is an index listed on the ADX and DFM. The Chimera S&P UAE UCITS ETF was launched in February 2021 and replicates the S&P UAE BMI Liquid 30/35 Index. The index is made up of the largest and most liquid stocks listed on the ADX and DFM, giving investors a broad exposure across all sectors of the UAE markets. The ETF has two share classes; the CHAEIN ETF is an income distributing share class listed on ADX, and the CHAE ETF is an accumulating share class listed on DFM. As of the end of April, the ETF had Dhs40.2m in AUM and has gained 4.4 per cent since launch, with a tracking error of 0.1 per cent net of fees.

What products and services does Chimera offer to regional clients?
Chimera Capital currently offers its clients easy access to the UAE stock markets through the four ETFs that are listed and traded on the ADX and DFM. In addition to the recently launched CHAEIN and CHAE ETFs, the Chimera S&P UAE Shariah ETF, which was launched in July 2020, tracks the S&P UAE Shariah 35/20 Index, an index consisting of the most liquid Sharia compliant stocks listed on the UAE markets. It has two share classes; the CHAESH is an accumulating share class listed on ADX, and the CHAESHIN is an income distributing share class listed on DFM. The ETF launched with AUM of Dhs2m, grew to Dhs50m within six months, and as at the end of April, had reached Dhs83.2m. The ETF has had a return of 37.4 per cent with a tracking error of 0.7 per cent, net of fees, as of the end of April.

How is the region’s alternative investment space expected to perform in the imminent future?
Within the alternative investment space, and specifically within the ETF industry in which we are currently focused, we expect the industry to continue growing. Moreover, we are optimistic about the UAE equity markets and confident that investors will gradually become more comfortable with new and innovative products to access the markets. We have already witnessed increased appetite from HNWI as well as local and GCC institutional investors for the Chimera ETFs, and local retail investors are also slowly beginning to get involved.

What are your long-term plans in the region?
While globally the ETF industry has grown to over $8 trillion in AUM, the ETF market in the Middle East is in a very nascent stage. ETFs listed in MENA equity markets are approximately $325m, and there are MENA focused ETFs listed on US and UK markets with AUMs of close to $1.2bn. The number of ETFs based on MENA assets is also extremely small with only a few locally listed ETFs. There are currently 10 ETFs listed on the MENA markets; four are listed in the UAE (all are Chimera ETFs), three in Saudi Arabia, two in Qatar and one in Egypt, making Chimera the largest issuer of ETFs in the region. Our long-term plans are to focus on our four ETFs while continuously exploring opportunities to expand our offerings to contribute to the ETF industry’s overall development in the region.

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