In March 2020, the Financial Times reported that Covid-19 had put an abrupt halt to the "rapidly expanding $6 trillion ETF industry". Fear and caution reigned amid concerns about a looming global economic meltdown.
However, despite the coronavirus pandemic, exchange-traded funds have proven to be a resilient investment, with investors ploughing $428 billion in new cash in ETFs so far this year, up 57 per cent compared with the same period last year.
This year, with the introduction of home-grown ETFs, it is time for investors in the Gulf to wake up to ETF opportunities.
Introduction to ETFs
An ETF is a low-cost, transparent and robust way to invest in a basket of assets, such as stocks, bonds or commodities, which are pooled together and traded on a stock exchange. An investor, therefore, does not need to invest in every single listed company or asset, but can achieve exposure to the whole basket of an index’s constituent assets at a low cost, while not having to worry about hidden costs and fees.
Fees charged on an ETF are represented by a total expense ratio that is used to cover the multiple costs, including but not limited to auditors, custodians, depositary, regulatory and the fund manager. Hence, the ETF fees include the services offered by different service providers to maintain the investment with no hidden costs.
An ETF – essentially a legal wrapper for different strategies – can track the S&P 500 or FTSE 100 index, or a particular industry such as technology, banking or oil and gas. Commodity ETFs, such as gold or soybeans, and currencies ETFs, such as the euro or sterling, also exist. As a legal wrapper, it guarantees transparency, ease of trading and a highly regulated and monitored fund.
With such a broad offering, ETFs have become an increasingly popular way to diversify investment portfolios across multiple sectors, assets and countries to help spread risk.
Growth of ETFs
Global assets held by ETFs have reached $7 trillion for the first time, boosted by massive emergency public spending measures that helped drive a rebound in financial markets.
Commodity exchange-traded products (ETPs) saw net new inflows of $64.2bn in the first seven months of 2020, according to data from consultancy ETFGI, with floods of money going into gold ETPs.
Bond ETFs had a solid year with net inflows of $141bn as of the end of July, up $9bn from last year, and equity ETFs generated $113bn of net new money in the first seven months of the year, only marginally down from the same period in 2019.
Investors all over the world piled into ETFs either as security against headwinds or as part of diverse portfolio strategies. Investors in the Gulf, too, need to consider ETFs in this light.
ETFs in the Gulf
The region’s ETF environment is at a nascent stage. While ETFs tracking Gulf indexes and economies exist, only a handful of ETFs are listed in the region itself. ETF providers have a limited Gulf presence. Assets under management in Islamic ETFs are marginal, representing an estimated 0.01 per cent of the global ETF market. Knowledge about ETFs is low or concentrated to those with a financial services background.
An ETF's price is live on the stock exchange throughout the trading day, allowing investors to track their investment in real-time
This year, however, the region’s ETF landscape changed. In July, Chimera Capital launched the first ETF tracking a Sharia-compliant index in the UAE with the Chimera S&P UAE Shariah ETF. The ETF offers two share classes – an accumulation class and an income class offering investors the opportunity to capitalise on the UAE’s economic prospects. With Chimera’s two ETF offerings, the number of Mena-based ETFs has increased to seven.
This expansion has helped awaken an appetite for home-grown ETFs tracking Gulf indexes and assets.
Passive index tracking ETFs are worthwhile investment tools to anchor a portion of an investor’s portfolio while freeing up time to focus on alpha-generating ideas. It’s also a low-cost and hassle-free investment with an added benefit of dividend distributions in some classes.
And due to its robust and transparent nature, an ETF is also a fast and efficient investment tool specifically for retail investors, as it provides a balanced investment strategy that replicates a specific index with the ease of buying a single share.
ETFs are set to play a bigger role in the Gulf, providing investors with relatively simple and liquid access to the region –and investors from the region should take note.
Seif Fikry is the chief executive and Sherif Salem is the chief investment officer of Chimera Capital, an Abu Dhabi-based asset management company.
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Three ways to limit your social media use
Clinical psychologist, Dr Saliha Afridi at The Lighthouse Arabia suggests three easy things you can do every day to cut back on the time you spend online.
1. Put the social media app in a folder on the second or third screen of your phone so it has to remain a conscious decision to open, rather than something your fingers gravitate towards without consideration.
2. Schedule a time to use social media instead of consistently throughout the day. I recommend setting aside certain times of the day or week when you upload pictures or share information.
3. Take a mental snapshot rather than a photo on your phone. Instead of sharing it with your social world, try to absorb the moment, connect with your feeling, experience the moment with all five of your senses. You will have a memory of that moment more vividly and for far longer than if you take a picture of it.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
Tonight’s Chat host Ricardo Karam is a renowned author and broadcaster who has previously interviewed Bill Gates, Carlos Ghosn, Andre Agassi and the late Zaha Hadid, among others.
Intellectually curious and thought-provoking, Tonight’s Chat moves the conversation forward.
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Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Other workplace saving schemes
- The UAE government announced a retirement savings plan for private and free zone sector employees in 2023.
- Dubai’s savings retirement scheme for foreign employees working in the emirate’s government and public sector came into effect in 2022.
- National Bonds unveiled a Golden Pension Scheme in 2022 to help private-sector foreign employees with their financial planning.
- In April 2021, Hayah Insurance unveiled a workplace savings plan to help UAE employees save for their retirement.
- Lunate, an Abu Dhabi-based investment manager, has launched a fund that will allow UAE private companies to offer employees investment returns on end-of-service benefits.
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, Leon.
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
The alternatives
• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.
• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.
• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.
• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.
• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
The specs
Engine: 2.0-litre 4-cylinder turbo
Power: 240hp at 5,500rpm
Torque: 390Nm at 3,000rpm
Transmission: eight-speed auto
Price: from Dh122,745
On sale: now
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Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
Jigra
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
MATCH INFO
Scotland 59 (Tries: Hastings (2), G Horne (3), Turner, Seymour, Barclay, Kinghorn, McInally; Cons: Hastings 8)
Russia 0
The specs: 2018 Audi RS5
Price, base: Dh359,200
Engine: 2.9L twin-turbo V6
Transmission: Eight-speed automatic
Power: 450hp at 5,700rpm
Torque: 600Nm at 1,900rpm
Fuel economy, combined: 8.7L / 100km
