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The African Development Bank (AfDB) is to launch its first multi-jurisdictional Fixed Income Exchange Traded Fund (ETF) in Africa - the African Domestic Bond ETF (ADBF). The Bank has appointed MCB Investment Management (MCBIM), a subsidiary of MCB Capital Markets, as fund manager and approved US$25mn seed capital for the fund
The ADBF is aimed at encouraging bond issuance in local currencies by facilitating access to local fixed income markets for investors. The ETF will be invested in both government and corporate bonds, and will initially be listed on the Stock Exchange of Mauritius.
MCBIM pioneered this area in early 2013 with the launch of the MCB Africa Bond Fund, an actively managed US dollar-denominated fund that focuses on the local currency bond markets of 13 countries in Africa. The fund has consistently outperformed its benchmark since inception and is up 9.52 per cent in absolute terms this year (source: the Mauritius Commercial Bank Ltd, 9 December 2016).
The ADBF was conceived as part of the AfDB’s African Financial Markets Initiative (www.AfricanBondMarkets.org) in 2008. Through this initiative, the AfDB aims to strengthen African economies by reducing their dependency on foreign currency denominated debt, increase the range of available financing options and act as a catalyst for regional market integration.
Stefan Nalletamby, the AfDB’s Director for Financial Sector Development, commented, “In developing markets, it is particularly important for the lead institutions to act to reduce financial market impediments and instil local and international investor confidence. AfDB is leading the establishment of the ADBF as a sovereign fixed income ETF investing in different countries which will be the first time an institution of this kind is established in Africa. AfDB is the premier development Bank for Africa and the Bank’s leadership in the establishment of ADBF is demonstrable of the Bank providing a local solution to several structural weaknesses.”
Rony Lam, Chief Executive Officer of MCB Capital Markets, commented, “We are privileged to have been selected by the AfDB as fund manager for this ground-breaking fund. The ADBF will pave the way for the development of local bond markets in Africa and we are proud to be associated with this important initiative. This demonstrates MCBIM’s fund management capabilities and confirms our position as one of the leading African fixed income specialist firms