- Datvest ETF offers exposure to leading consumer staples counters
- After running for 10 months inflation-adjusted losses hit ZWL$343 million
- Datvest remains in a robust position, with ZWL$328 million in assets
Harare - The beleaguered Zimbabwean economy has tested the mettle of many companies over the past year, as hyperinflation and unstable markets created strong headwinds. However, the recently formed Datvest Modified Consumer Staples Exchange Traded Fund provides a ray of hope amidst the storms. Though the fund recorded inflation-adjusted losses in its first year of operations, managers express optimism for 2023 based on strengthening fundamentals.
Formed in March 2022, Datvest ETF offers exposure to leading consumer staples counters on the Zimbabwe Stock Exchange through a single unit. The innovative fund enables investors to participate in the growth of companies supplying essential everyday items like food and beverages. After running for 10 months, Datvest managers faced the unenviable task of reporting the fund's maiden results against a backdrop of economic tumult.
Though inflation-adjusted losses hit ZWL$343 million, historical nominal profits checked in at ZWL$93 million. The discrepancy arose as listed share prices failed to keep pace with runaway inflation near 250% - a common plight in hyperinflationary contexts. Nevertheless, Datvest remains in a robust position, with ZWL$328 million in assets unchanged from its adjusted inception value.
According to the sanguine fund managers, Datvest's fortunes should shift gears as the overall stock market stabilizes and recovers in 2023. They highlighted the high-quality defensive shares in the consumer staples sector held in the portfolio as ripe to generate gains during an upcycle. The midfielders cited as most promising include leading beverages producer Delta Corporation, food giants Innscor and National Foods, as well as diversified group Meikles.
With consumer spending power rapidly diminishing in Zimbabwe, companies catering to basic everyday needs have proven relatively resilient. Businesses making products like cooking oil, bread, drinks and soap should see demand sustain, though consumers continue trading down to more affordable options. Datvest offers a well-balanced, low-risk avenue for investors to gain exposure across the entire consumer staples sphere.
The fund managers enthusiastically noted the potential for certain portfolio companies to migrate to the US dollar-denominated Victoria Falls Exchange. By avoiding the distortions of hyperinflation accounting, dollar share prices on VFEX provide a stable means of value preservation. The move also opens up companies to international investors seeking hard currency returns.
Overall, Datvest managers enthused that the fund remains ideally structured to navigate changeable conditions and seize opportunities during a stock market recovery. They highlighted the defensive nature of consumer staples against economic shocks, with revenues far less cyclical than sectors like mining and banking.
In their responsiblity statement, the managers emphasized adherence to sound accounting principles, prudent judgements and going concern assessment in an extremely challenging environment. All financial reporting complied fully with legislation and inflation-adjusted IFRS standards. The fund limitations were also carefully observed, showing discipline even amidst temptations to stray beyond the consumer staples mandate.
Corroborating Datvest's integrity, trustee Stanbic Investor Services Zimbabwe verified proper conduct in all material respects. Their oversight ensures adherence to the fund's founding deeds and legislative obligations. Independent assurance protects unitholders from potential governance lapses.
Though Datvest's initial steps traced a bumpy road, reflections on the past year inspire confidence more than trepidation. Inflationary distortions skewed reported earnings, but underneath the surface, the fund assembled a robust basket of defensive shares. Now, with tailwinds gathering pace, Datvest looks ready to deliver tangible returns and provide wary investors some respite from the storms.
Equity Axis News
