Abu Dhabi fund launches ETF to invest in UAE large caps

An Abu Dhabi-based asset management firm said on Monday it was launching a physical, in-kind exchange-traded fund (ETF), which would invest in the largest UAE stocks by capitalisation.

Afkar Capital, which was founded at the end of last year, is launching the UAE dirham-denominated fund despite volatility in local equity markets because of low oil prices and global economic instability.

The ETF will list on the Dubai Financial Market on Wednesday, replicating the S&P UAE BMI Liquid 20/35 Capped Index, Afkar's chief executive Seif Fikry told Reuters. He declined to give a projection for the size of the fund, saying it would be open to all investors.

Unlike swap-based ETFs, which replicate equity indexes using derivatives, physical, in-kind ETFs hold the underlying stocks in an index through a custodian - an arrangement which proponents say can reduce counterparty risk. BNY Mellon will be global custodian for the fund.