Dreadnought Capital is currently developing the Dreadnought Capital Traded Indices, a series of Pan-African indices based on the specific needs of investors. Dreadnought Capital will create and calculate a range of indices, the hallmark of which being that they are tradable, purpose-created indices for the listed derivative instruments.
The resultant philosophy is flexible in its approach, such that the indices are suited to emerging or frontier markets where a dexterous approach is required due to the varying and unique nature of each market. Emerging and frontier markets are often plagued by a lack of easy access and very small and tightly held available free float, resulting in low liquidity. The Dreadnought Capital Traded Indices aim to establish three primary principles. These are:
- Unique construction to best suit the needs of the underlying country, exchange or security characteristics;
- Traded Indices, with overlaid derivatives products. The treatment of corporate actions and adjustments is vital to the underlying integrity of the index. A simple principle of "no arbitrage" determines the necessary adjustment to the index in the case of adjustments (i.e. the holder of the derivative index must be indifferent as to whether he/she holds the derivative or a basket of the underlying securities);
- Liquidity provision - the existence of the traded indices improves the liquidity of the underlying securities.