BY PETER EGWUATU

Vetiva Fund Managers Limited has notified the Nigerian Stock Exchange, NSE, that Securities and Exchange Commission, SEC, has granted approval for the Initial Public Offer of Griffin 30 Exchange Traded Fund (VG 30 ETF) which will open to the public for 15 working days in line with SEC Rule 301, commencing Monday, 13th January, 2014 and closing Friday, 31st January, 2014.

Mrs Oteh

If the fund is listed on the NSE, it will become the second Exchange Traded Fund (ETF). An Exchange Traded Fund (ETF) is an investment vehicle that tracks an index, a basket of assets, or a commodity, but trades like regular shares on a stock exchange.

Meanwhile, the NSE had explained that ETFs are less expensive to operate than actively managed funds because they (ETFs) have less frequent portfolio changes.
On transparency, it noted that the performance and portfolio composition of an ETF reflects the underlying index or commodity, as the holdings of an ETF closely mirror the underlying index or commodity it tracks.

The NSE further stressed that an ETF is a direct and inexpensive way to attain diversified exposure to an index, commodity, sector, or region, while remaining in the capital market.

Some advantages of ETFs include: Providing a cost effective way of trading a basket of shares through a single transaction, offers a market related performance or return; allows for diversified exposure through buying a single share, as well as provides an opportunity for investors to track a market.

On the other hand, the disadvantages of ETFs include: prices determinination by market forces, so a buyer might buy at a slight premium or discount versus the Net Asset Value (NAV).    Some ETFs may not track widely accepted indices, which sometimes result in higher costs and higher risks.

Meanwhile, the risk associated with ETFs includes general market risks, interest rate risks, liquidity risks, inflationary risks, and legal and regulatory risks. An investment in ETFs may increase or decrease in value as the market changes.