Batanai Matsika 
THE year 2021 was another exciting year for investors on the Zimbabwe Stock Exchange (ZSE) as most made some good returns. The way to make money on our markets has indeed been to bet on recovering and well-managed businesses. Other moves such as “following big and smart money” (copy-cat strategy) have also paid off. 
We have already started getting enquiries on what would be the next big ideas for investors and traders in 2022. Now, here is a great piece of advice that you will not find in any of the regular stock market newsletters. Are you ready? Here it is: Do not spend all your bonus money yet. In fact, sell your car and hold on to cash because there is something big coming up soon!
Readers might have realised that I am a fan of Exchange Traded Funds (ETFs). This is because the global market for ETFs has grown dramatically over the past decade, as investors have sought greater diversification at a reduced cost. On the Zimbabwean market, we have witnessed the introduction of an index-tracking ETF (the Old Mutual Top 10 ETF). We believe that the next big opportunity on the ZSE will be the-soon-to-be launched actively managed multi-sector ETF.
An actively managed ETF is a form of exchange-traded fund that has a manager or team continuously making decisions on the underlying portfolio allocation instead of tracking the performance of a benchmark index.
This means portfolio weights and counters will inevitably be changed over time. This will be Zimbabwe’s first actively managed ETF. It will be listed on the ZSE by way of introduction. The objective of the fund will be to seek capital appreciation by investing across various sectors (banks, real estate, insurance and industrial). In other words, this multi-sector ETF will seek alpha returns by investing where there are money making opportunities.
From a valuation standpoint, financial services stocks are looking cheap and that is why a significant share the fund’s investable asset base will initially be invested in the financial services sector.
Another important attribute of this ETF is that asset allocation will be done using a proven proprietary model, which focuses on firms that are fundamentally sound, well managed and are reasonably expected to deliver future earnings per share growth more than consumer price inflation. Below is a summary of the key features of the ETF.
Easily accessible: The fund will be listed on the ZSE and therefore units can be bought or sold through any stockbroker throughout the trading day and through the online trading platforms for retail investors;
Relatively cost efficient: Generally, ETFs attract lower fees compared to traditionally-managed funds, as well as single-stock investments;
Transparent: Unlike in a unit trust (or mutual fund), the underlying assets are fully disclosed to the investors in their proportions;
Exposure to illiquid counters: The ETF will grant investors exposure to the relatively illiquid counters, thus increasing the opportunity for value derivation;
Flexible: Actively managed ETFs allow fund managers to respond accordingly to changes in the marketplace by adjusting the underlying portfolio;
Opportunity for market-beating returns: Actively managed ETFs present investors with the potential opportunity to beat the market whereas passively managed ETFs only seek to match market performance; and
Based on a proven proprietary model: Investors will have access to a fund whose portfolio composition is constructed according to a proven proprietary model, which aims for long-term capital appreciation and primarily focuses on future growth prospects in relation to the historic and forward PE ratios.
All in all, we contend that the multi-sector ETF will be the next big idea for both retail and institutional investors in Zimbabwe for 2022 and beyond.
What should also be equally exciting for investors out there is that the creators of this upcoming multi-sector ETF have, over the years, developed a powerful stock picking model that is based on fundamental research and market intelligence. Watch the space!
Matsika is head of research at Morgan & Co, and founder of piggybankadvisor.com. He can be reached on +263 78 358 4745 or batanai@morganzim.com / batanai@piggybankadvisor.com
