Omega Ukama 
THE Old Mutual (OM) Exchange Traded Fund (ETF) has had a strong start to the year, with gains of about 60 percent compared to four percent for its benchmark, the Zimbabwe Stock Exchange’s Top Ten Index.
ETFs are managed funds that track the performance of a specified security or index.
Investors buy units of a passively-managed ETF ― such as the OM fund ― hoping for returns similar to the underlying index.
Such funds, however, rarely ever mimic the underlying perfectly. Even rarer is a scenario where the fund outpaces the benchmark by a margin as wide as the OM ETF has seen.
Old Mutual Investment Group Zimbabwe (OMIG), the sponsor of the ETF, says this gap ― which is called a tracking difference ― arises from a combination of management fees, tax treatment and dividend timing.
To minimise the tracking difference risk, OMIG says it uses a “full replication investment strategy”, where it buys all the underlying securities of the index in their exact proportions.
The investment firm this week announced constituents of the fund for the first quarter of 2022, with Econet Wireless Zimbabwe given the highest weight of 22,8 percent.
The constituents of the fund reflect the ZSE Top 10 index, which is independently calculated and managed by the local bourse every quarter.
Constituents of the ZSE Top 10 Index were unchanged after the latest quarterly review on December 31, 2021.
Meanwhile, a third ETF is in the offing for Zimbabwe’s capital market following the introduction of a second one this month, the Securities and Exchange Commission (SecZim) has revealed.
The OM fund, which was introduced in December 2020 when OMIG posted seed capital in the form of scrip weighted according to the ZSE Top Ten Index, was the country’s first ETF.
The second ETF was introduced earlier this month. It is an actively managed multi-sector fund sponsored by Morgan & Co, a local investment bank. It is also Zimbabwe’s first actively managed ETF.
An actively managed ETF has a manager or team making decisions on the underlying portfolio allocation instead of tracking the performance of a benchmark index, such as is the case with the OMIG fund.
Speaking at the launch of the Morgan & Co fund, which started trading on the ZSE Tuesday, SecZim chief executive Tafadzwa Chinamo said his office was finalising on approvals for a third ETF.
Zimbabwe has lagged behind other markets with regards innovation in the financial markets as the Morgan & Co fund is only the third derivative to trade on a mainstream exchange in the country, after the OM fund and Caledonia Mining Corporation depository receipts on the Victoria Falls Stock Exchange.
newsdesk@fingaz.co.zw
