The Liquidity and Sustainability Facility (LSF) is happy to welcome the launch of the L&G LSF African Authorities Bond (USD) UCITS ETF, developed by Authorized & Common Asset Administration (L&G), it’s the first of its form accessible in Europe.
Constructing the Foundations: From Index to Investable Product
Since its institution, the LSF has labored with African and worldwide companions to handle a structural problem dealing with African sovereign issuers—illiquid secondary markets that translate into larger borrowing prices. This launch is a direct illustration of the LSF’s strategic ambition: to maneuver past particular person transactions and create a sturdy monetary market infrastructure for African economies. In 2024, the LSF established a collaboration with S&P Dow Jones Indices with a view to create an African Sovereigns Index: the iBoxx LSF USD African Sovereigns Index, which was launched in June 2024. For this index, the LSF developed a proprietary choice methodology and curation course of, providing traders a purpose-built benchmark.
By offering market members with a standardized, investable benchmark, the index goals to deliver extra transparency and liquidity to the African sovereign Eurobonds market, facilitate extra knowledgeable funding choices, and help broader market participation and funding in Africa. With this ETF, that benchmark turns into a public-market product, accessible to traders by a well-recognized and clear car.
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The Function of Indices and ETFs in Supporting Liquidity
Indices and ETFs can play a selected position in bringing liquidity to rising markets. By aggregating publicity to an outlined universe of bonds inside a single, tradable construction, they permit traders—who sometimes allocate capital by recognised benchmarks—to entry markets that may in any other case be tough to navigate individually. Because the investor base broadens, secondary market exercise tends to extend, supporting higher worth discovery and, over time, contributing to a discount within the liquidity premium borne by issuers.
A Milestone for the LSF’s Mission
This launch is a crucial milestone within the LSF’s mission to help the liquidity of African sovereign and company issuances, decrease the price of finance, and enhance liquidity in African capital markets. By facilitating pioneering fund launches resembling this, it seeks to mobilise non-public funding in African economies by developed capital markets.
Dr Vera Songwe, Founder & Chair of the LSF: “We’re delighted to see the launch of the primary ETF based mostly on the iBoxx LSF USD African Sovereigns index. It illustrates the rising urge for food of the non-public sector for African securities. It’s a privilege to work with main companions to construct momentum and appeal to a wider vary of traders to Africa’s capital markets. I wish to specific my gratitude to all companions and particularly, Afreximbank, whose help for the LSF’s mission and targets since inception has been instrumental in making this milestone attainable and driving the worldwide development of African monetary markets.”
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Prof. Benedict Okey Oramah, Former President and Chairman of the Board of Administrators of Afreximbank: “After we first supported the LSF, our ambition went past a single market instrument. We envisioned a basis for deeper, extra resilient African capital markets. The launch of this ETF with L&G is a tangible milestone in that journey—it demonstrates that African sovereign debt can appeal to the identical caliber of investable, standardized merchandise present in mature markets. That is what capital markets improvement appears like in apply.”