Omega Ukama 
THE difference between returns of the Old Mutual Exchange Traded Fund (ETF) and its benchmark — the Zimbabwe Stock Exchange (ZSE) Top Ten Index — narrowed to 63 percent at the end of May from 76 percent on March 31, 2021.
An ETF is a security that tracks another asset, index, sector or commodity, but which can be purchased or sold on an exchange the same as a regular stock.
For a number of reasons, ETFs rarely ever track the underlying perfectly.
The Old Mutual Investment Group Zimbabwe (OMIG)-sponsored instrument’s year-to-date gains closed May at 98 percent from 93 percent at the end of March, while returns of the heavies Index increased to 34 percent from 17 percent during the same period.
The ETF lost 9 percent in April against the Index’s gains of 2 percent. Its May returns of 13 percent were, however, at par with the underlying.
The difference between the performance of an EFT and the yardstick is known as a tracking difference. Early investors in the OM EFT will be happy with its performance so far as such instruments typically under-perform their underlying indexes by a small margin, with a positive tracking difference of 63 percent virtually unheard of. Analysts, however, expect the difference to continue to shrink.
“There was a hype of demand as the OM ETF was introduced, pushing up price ahead of fundamentals and the market.
“It seems the ETF has started re-correcting to the market,” Invictus Securities’ head of research, Mutandani Makuyana, told The Financial Gazette recently.
Meanwhile, the ETF has listed an additional nine million units, bringing the total in issue to 141 million, ZSE chief executive Justin Bgoni announced last month.
The instrument was initially listed in January with 80 million units. Its market capitalisation has gone up from $80 million at listing to $280 million.
“We still believe there is more room for additional products including more ETFs and new REITS.
“We continue in our quest to make our market a viable option for your investment,” Bgoni said.
It is also now the only fully dematerialised counter on the local bourse, according to Chengetedzai Depository Company (CDC).
Dematerialisation is conversion from physical certificates to electronic book-keeping.
CDC says 25 counters are now dematerialised and the average penetration ratio is now at 51,27 percent.
“All new listings are also being encouraged to insist on dematerialisation, like OM did with its ETF,” CDC’s chief executive, Campbell Musiwa, recently told this publication.
