Absa Capital (the investment banking division of Absa Bank Limited, and affiliate to Barclays Capital) is a leading provider of ETFs in the South African market and is credited for several innovations and market-firsts in the ETF space – the first ETF based on a customised, equally weighted index (the NewRand ETF), the first, and still the only, commodity backed ETF in SA (the NewGold ETF), the first family of ETFs based on fundamental indexation (eRAFI™ ETFs), as well as the first and only family of multi-asset ETFs in SA (MAPPS™ ETFs).
It strives to offer investors low-cost, convenient and innovative alternatives to traditional investment products. In particular, Absa Capital’s strategic focus is to provide simple, targeted and cost-effective beta (market benchmark indices) and beta-plus (“smart” indices, style and thematic indices, investment strategies) investment building blocks for institutional investors.
To this end, Absa Capital has created a series of five Component ETFs that are now available to investors. The Component ETFs were designed to offer investors cost-effective access to major asset classes – equities, nominal bonds, inflation linked bonds and money market, as well as to investment themes / risk factors (e.g., equity momentum).
The Equity Momentum ETF aims to capture returns from the short-term price momentum observed in the South African equity market. It tracks performance of the Barclays Capital/Absa Capital South Africa Equity Momentum Index, a total return index, comprising South Africa equity market shares ranked by their relative price momentum over the assessment period where stocks with higher relative price momentum are given higher weightings.
The initial universe is always filtered based on total market capitalisation and liquidity (measured by three months average value traded). Both filters are inflation adjusted on an annual basis to ensure better tradability. The remaining stocks are filtered based on relative momentum and any stock with negative value is excluded before the ranking takes place. Stocks are ranked in descending order based on relative momentum and top 40 ranked stocks are selected.