NBAD plans first ETF in Middle East

National Bank of Abu Dhabi plans to launch the Middle East's first exchange-traded fund to try to attract more international investors.

National Bank of Abu Dhabi (NBAD) plans to launch the Middle East's first exchange-traded fund to try to attract more international investors. The fund, known as an ETF, will be listed on the Abu Dhabi Securities Exchange (ADX) in two months, a senior NBAD official said. It will be licensed by a leading global index provider and will track some of the Gulf's 50 biggest stocks, said Giyas Gokkent, NBAD's co-head of asset management and chief economist.

"We think there will be a lot of demand as exposure of international investors to this region is still behind the curve," Dr Gokkent said. "This particular product will be novel as it will give investors access at one shop." Investor appetite for ETFs has grown in the financial crisis as active fund management has suffered and investors reassess their exposure to equity markets. Net inflows into exchange traded products (ETPs) totalled ?41 billion (Dh215.87bn) over the past 12 months, according to a report released yesterday by iShares, the world's largest provider of ETFs.

Holding assets such as stocks, an ETF trades at about the same price as the net value of its underlying assets over a trading day. ETFs are traded widely in the US, Europe and Asia. The ADX has been planning since last year to list ETFs to diversify its narrow product base. But its plans were hampered by the financial crisis. The launch of the NBAD fund issubject to regulatory approval, Dr Gokkent said.

NBAD, the UAE's second-biggest bank by assets, manages about US$1.5bn (Dh5.51bn). Overall assets under management for European ETPs stand at ?137bn, representing a 28 per cent increase over the past year, according to iShares. The strength of flows into regional funds reflects investor demand for broader based indexes while increased flows into emerging market ETPs reveal their confidence in their recovery prospects, said Nizam Hamid, the head of sales strategy at iShares Europe.

The ADX may yet have some competition in ETPs in the region, as Dr Gokkent said there were "a number of entities in other countries trying to play catch-up". * with agencies [e-mail]