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Rand Merchant Bank launches the RMB MidCap ETF

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Rand Merchant Bank (RMB) has launched South Africa’s first mid-cap exchange-traded fund, which will be listed on the Johannesburg Stock Exchange (JSE) on 15 August.

The aim of the RMB MidCap ETF is to provide returns for investors which are linked to the performance of the FTSE/JSE Mid Cap Index. The ETF will invest in all components of the index in proportion to the index weightings.

The index includes the 60 largest companies on the JSE, in terms of market capitalisation, which are not included in the FTSE/JSE Top 40 Index. The fund therefore invests in the 41st to the 100th largest companies on the JSE.

 

The Mid Cap Index has a market cap of around ZAR720bn with the top 10 stocks in the index as liquid, if not more liquid, than the bottom 10 stocks in the Top 40. In addition, mid-cap stocks have risen more than double those in the Top 40 with 69 per cent growth over the past five years versus only 32 per cent for the Top 40. Dividend yields on mid-cap stocks were also higher over this period at an average of 3.85 per cent compared to 2.68 per cent for the Top 40.

“We saw an opportunity in the mid-cap sector as it has displayed strong performance and represents an interesting prospect for investors who would like direct exposure to the mid-cap sector of the JSE,” says RMB head of exchange traded products, Yusuf Wadee. “Remarkably, the Mid Cap Index has historically displayed less volatility, and is certainly more balanced in terms of sector exposure, when compared to the Top 40 Index which is heavily skewed in favour of resources. However, these two market sectors offer two very different value propositions and we certainly see them complementing each other in constructing a holistic portfolio.”

Costs incurred on the RMB MidCap ETF are 50 basis points for investment amounts under ZAR20m and 20 basis points on a sliding scale for every rand thereafter. The RMB MidCap ETF pays a quarterly distribution to investors, which is made up of dividends or interest earned on the underlying shares.

RMB’s MidCap ETF is the third in RMB’s suite of ETFs, all of which are listed on the JSE.

 

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