No cloud­ing of is­sues in this lean busi­ness

With a brand-new firm and fresh in­vest­ment ve­hi­cles, this en­trepreneur is mak­ing it eas­ier to in­vest in a se­lec­tion of Africa’s big­gest com­pa­nies

Financial Mail - - PROFILE - Mau­rice Madiba CEO of Cloud At­las In­vest­ing Stephen Cranston cranstons@fm.co.za

At 30 years old, Mau­rice Madiba has set up SA’S first black-owned ex­change traded fund (ETF) busi­ness and only its sec­ond black-owned col­lec­tive in­vest­ment scheme man­age­ment com­pany after African Col­lec­tive In­vest­ments.

Madiba named his busi­ness after a crit­i­cally ac­claimed 2012 film, Cloud At­las.

And yes, it was a firm he started in his mother’s garage, at the tail end of a suc­cess­ful spell at Deutsche Bank.

He worked for two years de­vel­op­ing and re­fin­ing the busi­ness. By then he had been sat­u­rated in the Deutsche way of ap­proach­ing equities and con­tracts for dif­fer­ence. Be­fore that he had worked as a re­search an­a­lyst at the pri­vate eq­uity firm Con­ver­gence Part­ners. He had also at­tended the Thabo Mbeki African Lead­er­ship In­sti­tute.

He was a fel­low of the Allan Gray Or­bis Foun­da­tion, a large share­holder in ven­ture cap­i­tal­ist E Squared. A year be­fore Cloud At­las listed, E Squared came on board as a fi­nancier. So it was log­i­cal for Madiba to turn to it for eq­uity fi­nance.

Cloud At­las made its de­but on the JSE in April. Its first prod­uct, in the African Mar­ket In­dex se­ries, is the AMI Big50 ex-sa fund. This will soon be fol­lowed by the AMI Con­sumer and AMI Prop­erty funds. AMI Big50 tracks the top 50 listed com­pa­nies in Africa out­side SA.

Madiba says that as an ETF, as op­posed to an ex­change traded note (ETN), it has to hold the shares in the fund pro­por­tion­ately.

In­vestors in com­pet­ing African ETNS will find that it of­fers only a prom­ise to fol­low the in­dex, and has no obli­ga­tion to repli­cate it.

No coun­try or sec­tor is over­rep­re­sented in the port­fo­lio. It cuts across 15 African mar­kets. Nige­rian banks, which of­ten dom­i­nate these in­dices, are rep­re­sented by Guar­anty Trust, Zim­babwe by cell­phone provider Econet and brewer Delta, and Kenya pri­mar­ily by Kenya Com­mer­cial Bank and Sa­fari­com.

Cloud At­las has a team of just four and is based in Rose­bank, Jo­han­nes­burg. Madiba can keep it lean, as he is able to out­source most of the func­tions: RMB is trus­tee, Maitland is fund ad­min­is­tra­tor while Thom­son Reuters main­tains the in­dex and does the ap­pro­pri­ate cal­cu­la­tions. But fi­nance, much of the an­a­lyt­ics and busi­ness de­vel­op­ment re­main in-house.

Madiba says it will not be an easy prod­uct to man­age. Un­like reg­u­lar Africa unit trusts, it can’t be gated — Cloud At­las can never refuse to let any­one in or out of the fund.

What Madiba doesn’t tell you is that the movie Cloud At­las, which starred Tom Hanks and Halle Berry, might have wowed the crit­ics, but it was a com­mer­cial flop.

Thus far, his ver­sion of Cloud At­las has im­pressed the crit­ics. Since Madiba’s Top50 fund launched on April 20 it has been the sec­ond-best in­ter­na­tional ETF on the JSE, after Syg­nia Euro, with a 17% re­turn. The Cloud At­las fund has de­clared its sec­ond div­i­dend and it has a 3% yield. Rais­ing as­sets has proved tougher, but it has grown from an ini­tial R2m to R14m. But is the busi­ness too spe­cialised for the SA pub­lic?

We’ll soon find out.

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