The launch of Zimbabwe’s third Exchange Traded Fund the Datvest Modified Consumer Staples Exchange Traded Fund (DMCS) has caused a lot of excitement on the Zimbabwe Stock Exchange.  The first ETF, The Old Mutual ZSE Top Ten ETF (OMTT) launched in January 2021 and the appetite for these products has proven to be huge. In all this excitement it is important to remember that not all ETFs are created equal. With reports in the Herald suggesting that two more ETFs are on the way, it’s time we talk about what to look at before investing in an ETF.

Exchange-Traded Fund (ETF)

Perhaps we should start with a recap on what ETFs are. ETFs are funds created to invest in an underlying asset. The asset could be anything but in this case, the asset is a portfolio of shares. Various approaches are available on choosing the underlying portfolio and we currently have index funds, which track a stock market index such as the Old Mutual Top Ten ETF matches the ZSE Top Ten Index. The other approach is a managed fund in which the fund sponsor actively chooses the constituents which the fund invests in as we have with the Morgan & Co Multi-Sector (MCMS) ETF and the newly launched Datvest Modified Consumer Staples (DMCS) ETF. The ownership of the fund is broken down into small units which are traded daily on the stock exchange similar to the way shares are traded. If you want to understand ETFs in greater depth you can call back to the article explaining ETFs.


The first thing to be clear about is your goals. Do you plan to be invested for the short, medium or long term? Why do you think an ETF is the way forward for you and your goals. Your goals are the lens through which you view everything. So the question is not as to whether a particular ETF is a good investment but rather if it is a good investment based on your goals. You can go back and read this article about determining whether or not an investment vehicle is right for you.

Underlying benchmark

The underlying benchmark in simple terms is the asset or group of assets that the fund invests in or intends to invest in. This will give you some idea of what to expect from the fund and what your success as an investor in the fund relies on. In a managed fund for example you are relying on the ability of the fund manager to pick stocks and to make adjustments quickly.  With index funds, you are relying on the performance of the index. There is no guarantee that either will go right but you are better off knowing what to watch.

Net Asset Value (NAV)

When you’re looking at the underlying benchmark you’re looking at the quality of the fund. The Net Asset Value (NAV) is about looking at the quantity of the fund. That is to say what you’re buying in terms of assets. The table below displays the closing price vs the Net Asset Value of the ETFs currently listed on the ZSE on the 8th of March 2022. Though we have used indicative opening NAV for the DMCS we can see that it is trading at a hefty premium of 123% over its NAV. While all 3 ETFs are at a premium to their NAV it communicates the market sentiment concerning our current crop of ETFs. To put it in simple terms, paying an extra 43% for assets that grew around 200% in the previous year isn’t a bad idea. Paying an extra 300% for the same may not be a good idea.

ETFPrice 08/03/2022NAVPremium
DMCS2.231 .00*123%
MCMS  14.54712.830013%
OMTT  8.88876.226043%

Fees and dividends

You also want to pay great attention to the fees and dividends. There are costs associated with starting and running an exchange-traded fund. Active managers have the task of picking the constituents and their weights while index fund managers must rebalance their funds to match the indices they track. How much do they charge for this and on what basis? With dividends, you want to know what the approach is to the dividends. Does the fund pass on dividends to unit holders? If so after how long? Perhaps the fund reinvests dividends in the fund. Does their approach match your desires when it comes to dividends?

ETFs are exciting and they’ve made the right sort of entry into the Zimbabwean capital markets. As we look forward to more and more exciting listings, we can learn to look out for these things mentioned here.