The Barclays NewGold exchange traded fund (ETF) sold Sh1.125 million worth of units on the first day of trading at the Nairobi Securities Exchange.
The issuer said it was expecting a gradual pickup of trades as fund managers come to appreciate the new asset class.
Market data showed that 900 units were sold at a price of Sh1,250 each based on yesterday’s price of gold, which stood at $1,255.90 in the international markets.
The ETF is the first of its kind to be issued in the Nairobi Securities Exchange and has 400,000 units on offer.
“We have had 900 units sold. It is fair to say that the interest is there for the securities, but also in practical terms the big buyers will be fund managers, who will need to educate their trustees to ensure that they understand how it works so that they can start to invest in it,” said Barclays Kenya head of markets Anthony Kirui.
“The first step is for the big investors to gain that understanding…initially it (uptake) will be gradual, but I expect that the market will build up in time. Some of the comments we have had is that what we are bringing in is actually not enough.”
To start off trading in the ETF in Kenya, Barclays will act as the first market maker, availing the units to other stockbrokers on behalf of interested buyers.
These initial buyers can then trade their units on the secondary market at the NSE from Thursday, once the initial sales reach their settlement cycle of three days.
The ETF’s pricing is based on real time price of gold in international markets — where one unit is pegged on the price of a hundredth of a troy ounce of gold and the prevailing shilling/dollar exchange rate. NewGold said it will use the proceeds of the issue to buy gold bullion that will back the securities.
Given that the security is backed by physical gold, investors can trade in their units to the issuer for actual gold bullion, although there is a high threshold in place.
“You can surrender your physical securities in exchange of gold, but there is a minimum amount you can surrender, set at 400,000 units, which will see you get 10 gold bars,” said Michael Mgwaba, head of exchange traded funds at Barclays Africa.
This means that this option is likely to be available to only high net worth fund managers, who make buys worth at least Sh500 million at current prices.
The ETF was first listed on the Johannesburg Stock Exchange in 2004, and has since then had secondary listings on other African markets including Botswana, Nigeria, Ghana, Mauritius and Namibia.
The fund is open-ended, meaning that so long as investors look to buy the firm will issue more.
The number of units is not capped like is the case with issued shares of companies.