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BIPS Inflation-X: Phase two lists on the JSE

The second phase of the listing of the Bips Inflation-X exchange traded fund (ETF) took place on the JSE this morning (Monday 1st June), giving the fund a total market cap of R110-million.

The first phase of the listing, which included subscriptions in specie, using bonds as an underlying asset, took place on 20th May. Today’s listing took place for cash subscriptions received during the Initial Public Offering which gave fund managers Rand Merchant Bank (RMB) two weeks to buy the underlying government Inflation-Linked Bonds with the cash.

Bips Inflation-X is a unique investment as for the first time in South Africa investors will be able to purchase inflation protection (in the form of Inflation-Linked Bonds) on the JSE in the same way you would trade a normal share.

The ETF offers investors a relatively attractive, real rate of return (currently 2.4% over the long term) in excess of inflation. This is an important feature of the product as real yields should be the main focus when making any investment decision, as this negates the impact or direction of inflation.

Distributions, in the form of interest on the underlying bonds, are made to investors quarterly (net of fees). The initial investment is continuously adjusted for headline inflation and the interest received is calculated on the inflation-adjusted investment thus providing investors with an inflation-adjusted cash flow, or simply referred to as a real yield.

“Very few asset classes can offer investors guaranteed cash flows, capital preservation and a natural hedge against inflation, which are all attributes of Inflation-Linked Bonds,” says RMB’s Christopher Dowley,

Bips Inflation-X will track the performance of the Government Inflation-Linked Bond Index (GILBx), which will be published daily on the Bips website (www.bipsetf.co.za). As the underlying bonds in the portfolio are issued by the South African government, the assets are essentially credit risk free.

Management fees are comparatively low starting at just 0.39% and reducing on a sliding scale down to 0.10% depending on the amount invested.

Ends.

Contact

Christopher Dowley (Debt Capital Markets) at +27 11 282-4879