Even the fund manager stands to gain from transparency in reporting mutual fund activities.
Mutual funds in Nigeria are growing both in number and asset value. Going by the latest NAV Summary Report from the Security and Exchange Commission, (SEC) for the week ending June 19th, 2020, there are 106 mutual funds in Nigeria with a total asset value of N1,337,044,839,679 the equivalent of $3,714,013,444. That is about the most that one can confidently and unequivocally say about Nigerian mutual funds. That underscores the extent of transparency, or lack thereof, in mutual fund reporting in Nigeria. One would expect that an industry that large, one whose net asset value represents 10% of Nigeria’s stock market capitalization, would not be shrouded in any form of opacity.
银屑病土方What is Transparency:银屑病土方 The dictionary meaning of transparency is “the state of being easily detected or seen through, easily and readily understood”. When that definition is applied to mutual funds, transparency translates into the ability of the investor to look through his investment portfolio report or fact sheet and be able to see what the investment manager is doing with his money.
银屑病土方Why Transparency in Reporting Matters to the investor:银屑病土方 Though mutual fund investors may largely be retail investors with not so much investment knowledge, they would like to monitor their investment performance, the risks involved as well as what their money is being invested in. In addition, investors would like to know how much they pay by way of fees. Transparency makes that information known. To the investor, more transparency translates to more information upon which investment decisions can be made. It also increases the level of comfort that investors have about the fund manager to whom they have given their money to manage.
银屑病土方READ ALSO: Top 10 high-yield money market funds that beat inflation in Nigeria银屑病土方
银屑病土方Why Transparency Matters to the Fund Manager:银屑病土方 Even the fund manager stands to gain from transparency in reporting mutual fund activities.? Fund managers operate in a competitive market environment and transparency gives them a competitive advantage. A fund manager that discloses information readily, timely, and voluntarily stands to attract investment contributions from investors. It helps to make communication with investors clearer and timely.
银屑病土方Fund Managers Transparency Ranking:银屑病土方 Having made known what and why transparency in mutual fund reporting is and should be the norm, I present below a transparency ranking of fund managers based on the availability of requisite information on their website or elsewhere, the frequency and availability of fact sheets as well as the content of such factsheets.
银屑病土方Daily Prices:银屑病土方 Stanbic IBTC Asset Management Company has been at the forefront of mutual fund reporting transparency in Nigeria. It has daily fund prices for the 14 funds it manages updated daily on its website and sent to you upon request. Not only are the prices readily available daily, but they are also available on a historical (inception to date) basis.
银屑病土方Factsheets:银屑病土方 Prior to 2019, Stanbic IBTC Asset Management Company used to have a monthly fact sheet for each of their funds, but that got changed to a consolidated quarterly report. The quarterly report is released on a timely basis. The beauty of that report is that it tells the investor the risk profile of each fund, the expense ratio, asset allocation by sector, top 3 stock holdings (which is grossly inadequate disclosure) as well as current fund performance juxtaposed with 3- and 5-year performance data. The fact sheet also shows the investor the performance of the benchmark index for each fund.? Other information contained in the fact sheet includes fund size, NAV, initial and subsequent investments as well as fund objectives. The Q1 2020 factsheets are currently on the website.
银屑病土方Annual Financial Reports: 银屑病土方In addition to the rendition of the fact sheets as noted above, Stanbic IBTC Asset Management publishes the audited financial statements of all the funds under its management. Although that of 2019 has not been published, that of 2018 has been published.
银屑病土方READ ALSO: SEC DG, Mary Uduk, addresses impact of CBN’s policy on equities market银屑病土方
银屑病土方Daily Prices:银屑病土方 Vetiva Asset Management Company is the second most transparent fund manager in Nigeria. The daily fund prices are readily available although some times it looks like only the dates change without the actual prices changing. This may have to do with the valuation frequency of the funds.
银屑病土方Factsheets: 银屑病土方Vetiva Asset Management Company has a monthly factsheet for its funds. The fact sheet contains most of the information that investors require. It beats Stanbic IBTC as it reports the top 10 holdings, which is better than Stanbic’s 3 top holdings. Like Stanbic, Vetiva Asset Management Company reports the risk profile of its funds but not all, and also reports the gross expense ratio. In addition, it lets investors see the funds’ MTD, QTD, YTD, ITD performance in juxtaposition with the relevant benchmarks. The factsheets used to be timely but as at the time of writing, the latest available is for the end of March 2020, it is likely they fund manager may be changing to quarterly reporting like Stanbic IBTC. Other pertinent information on the fact sheet includes dividend history, NAV, Bloomberg identifier, and lots more.
银屑病土方READ ALSO: What You need to know about Stanbic IBTC’s Shari’ah Fixed Income Fund (“SFIF”)银屑病土方
银屑病土方Daily Prices: 银屑病土方Lotus Capital Asset Management comes next in line on transparency in mutual fund reporting. The fund manager publishes daily mutual fund prices but unlike Stanbic and like Vetiva, historical prices are not readily available. In that case, the prices are available on a get it or lose it basis.
银屑病土方Fact Sheets: 银屑病土方Lotus Capital Asset Management publishes its factsheets on a quarterly basis and has published Q1 2020 edition for each of its funds. Though it does not show expense ratio, it shows the management and incentive fee percentages as well as a description of the risk profile of the fund. In terms of returns, the factsheet shows the QTD, YTD and ITD returns. It does show 5 top stock holdings as well as asset allocation by sector.
银屑病土方Annual Financial Reports: 银屑病土方In addition to the fact sheets being available quarterly, Lotus Capital Asset Management publishes the audited financial statements of all the funds under its management. And the 2019 audited financial statement has been put on the platform.
银屑病土方Daily Prices银屑病土方: Quantum Zenith Asset management Company has made a lot of changes to its reporting and by so doing has become one of the most transparent in mutual fund reporting. Daily prices are readily available as well as historical prices in downloadable form.
银屑病土方Factsheets: 银屑病土方Quantum Zenith Asset management Company has the funds’ factsheets tucked away on the website The fund manager will be better off making it easier for investors to find the factsheets as its presence is not very evident from the home page.? The fact sheet has most of the required information including top 5 holdings. The beauty of the performance presentation is that it shows whether the fund is out or under perfuming the relevant index and by how much. Information on expense ratio is not provided except the management fee rate.
Daily Prices: United Capital Asset Management Company would probably have ranked the first or second fund manager if not for the lack of daily prices. On its web site, the last daily price is dated June 14th, 2019. However, I have been receiving the weekly prices upon request and investors can too.
银屑病土方Factsheets银屑病土方: United Capital Asset Mgt. Ltd publishes a monthly fact sheet, the latest being for the month of May 2020. The factsheet shows the risk profile of the fund, the total expense ratio, as well as MTD and YTD return numbers put side by side with that of the benchmark in addition to a 5-year performance summary.? Unfortunately, it does not contain information on what the funds are invested in but it shows the allocation by asset type.
银屑病土方READ MORE: Nigeria’s mutual fund asset value hits N1 Trillion银屑病土方
Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. MutualfundsAfrica.com and mutualfundsnigeria.com (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.
June 30, 2020 at 8:59 pm
These report is so FLAWED what is the clear basis for this ranking. Kindly explain how a company that updates their report quarterly can be ranked first. Clients have a whole 3 months without understanding what their funds are being used for. Has the writer heard of GIPS compliance? is Stanbic GIPS compliant, do they publish their price on the Nigerian Stock Exchange, do they have appropriate benchmarks for their Funds. Where calls made to the Asset Management business to ask questions? Are the assets in their portfolio marked to market to reflect transparency.
Obviously the writer works for Stanbic? Shame on Naira metrics for publishing such a report
June 30, 2020 at 9:00 pm
These report is so FLAWED what is the clear basis for this ranking. Kindly explain how a company that updates their report quarterly can be ranked first. Clients have a whole 3 months without understanding what their funds are being used for. Has the writer heard of GIPS compliance? is Stanbic GIPS compliant, do they publish their price on the Nigerian Stock Exchange, do they have appropriate benchmarks for their Funds. Where calls made to the Asset Management business to ask questions? are assets in their portfolio marked to market to reflect transparency.
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RSA return is an amount equal to the total pension contribution made, plus investment returns.
Nigeria’s Pension Scheme reform is a success. Nigeria essentially went from a Pay As You Go scheme owing about N2 trillion in unfunded pension liabilities, to an occupational scheme with nine million individual contributors with Assets under Management of N10.7 trillion. Nigeria today operates a Defined Contributory scheme, where the contributions are defined but the end benefits are not, unlike the previous Defined Benefits where the final benefits could be calculated and established as a liability, irrespective of fund return or accumulation to meet that obligation.
The Pension Reform Act of 2004 (PRA) created individual accounts called Retirement Savings Account (RSA), Pension contributions are fully invested in the RSAs. When a contributor retires, the RSA return is an amount equal to the total pension contribution made, plus investment returns. To be clear, the PRA only has a minimum guaranteed payout. The PFAs have the responsibility to ensure each contributor gets a real risk-adjusted return from invested assets.
银屑病土方READ MORE: Q2 2019: Sacked employees withdraw N113.21bn pension fund银屑病土方
I took a look at the asset allocation of the RSA, which essentially is what the PFAs are investing in to repay contributors. Asset Allocation is basically allocating a portfolio to different assets to achieve the objective of a client. A client has N1m and says “I want to retire, I don’t want risk, invest for me”. The most important question the investment manager will ask is how old you are? Why? That sets the investment horizon and drives the assets to be selected. If the client is near retirement, it automatically tells the investment manager that fixed income securities must take preponderance over risker variable assets like equity.
What if the client is 25? Well that means he has a lot of compounding periods to invest and must seek to grow the principal because inflation has a longer time to deplete the contributions.
What is the investment objective of the RSA? simple, Retirement Income. Whilst you work, you save into your RSA, when you retire, the RSA then pays you a “salary” called a Pension. Let’s look at the RSAs, how old is the client? According to data from PenCom 57% of RSA holders are aged below 40. If we consider that the usual retirement age is about 60, this is an incredibly young pool of contributors, to be clear only 12% of contributors were aged 51 years and above. Following best practice in asset allocation, such a pool of contributors have more years (thus more compounding periods), thus inflation risk is more prevalent, but that longer duration allows younger contributors more time to take and recover from risk, this means the bulk of their portfolios should naturally be in equities.
银屑病土方READ MORE: Why interest rates on treasury bills, bonds crashed银屑病土方
Based on the age of contributors the PFAs can accommodate more volatility which generates returns and grows the original principal so that the RSAs have sufficient after-inflation return. So what are PFAs doing? Let’s pick two years, 2007 and 2020
银屑病土方READ ALSO: DMO offers N150 billion worth of FGN Bonds for subscription银屑病土方
In 2007. Almost 81% of the RSA assets are in securities that will yield income, NOT grow principal. There was also a mismatch in allocation as a younger population got less allocation to equities. The PFAs will counter by saying FGN bonds were safer and Pension are safety first.
As of May 2020, the picture is unchanged but now 75% of RSA assets are in FGN bonds (Income) with only 5.15% in Equities (Capital Appreciation). The mismatch chickens have now come home as returns on T-bills and Money market has fallen and Nigerian equity yields now look very attractive.
银屑病土方Download the Nairametrics News App银屑病土方
My worry is that the PFAs return will not be “real” as inflation has now surpassed most fixed income instruments in Nigeria. PFAs were essentially chasing yields by buying short term Treasury bills which paid higher rates but with a shorter duration than equities and today, they are sitting on reinvestment risk.
We will do a deeper dive into the RSAs next time.银屑病土方
PenCom’s Acting DG said pension fund managers have been very cautious about where they invest.
Nigeria’s National Pension Commission (PenCom) disclosed that the country’s total pension assets increased to N10.8 trillion as of May 2020, up from N10.6 trillion in April this year.
The report, which was published Monday on PenCom’s website, also revealed that the total number of Retirement Savings Account (RSA) holders had increased from N8.8 million as it was last reported, to more than 9 million as of May this year.
银屑病土方READ ALSO: Pension funds are in trouble as inflation erodes asset values by 100%??银屑病土方
The report went further to break down the various asset classes in which the pension funds have been invested. For instance, a bulk of the funds (about N7.2 trillion representing 66.7%) was invested in Federal Government’s Securities. The table below contains the complete breakdown.
银屑病土方READ ALSO: Is the pension asset just another cookie jar?银屑病土方
Meanwhile, PenCom’s Acting Director-General, Aisha Dahir-Umar, said pension fund managers have been very cautious about where they invest. She also offered further explanation, saying:
“Since the introduction of the Multi-Fund Structure that created four different funds, the investment of the funds has varied from one another. Fund 1 has a maximum limit of 30 percent, Fund II has a maximum of 25 percent and Fund IV allows maximum of five percent.
“The allowable exposures to variable income instruments have been designed such that Fund I has the highest allowable limit, followed by Fund II, III and IV. This reduces the risk and uncertainty of contributors in line with their ages.’’
银屑病土方READ MORE: Private Sector drives industry growth, as PenCom remits N7.4bn into RSA银屑病土方
Recall that a recent article by Nairametrics mentioned how the COVID-19 pandemic had caused a drastic reduction in the rate at which new Retirement Savings Accounts (RSA) is being opened. Apparently, many companies have been unable to recruit new employees since the pandemic hit Nigeria and wrought economic challenges on different sectors. Unfortunately, PFAs’ failure to open sign up new RSA accounts could affect the total pension assets in the long run.
These are the best mutual funds in Nigeria to invest in based on performance.
Mutual Funds are a great form of investing especially if you are a passive investor. According to data from the Security and Exchange Commission, Nigeria has about 107 Mutual Funds cut across several Fund Types. Here is a breakdown of the Fund Types available for investors according to SEC.
To determine the best performing Funds, we looked at the Fund Prices as of the last business day in December 2019 and compared to the fund prices as of the last trading day of June 2020. These are the top 5. We also included profiles of the funds as described in their websites.
银屑病土方Explore useful research data from Nairametrics on Nairalytics银屑病土方
Vetiva’s The NewGold Exchange Traded Fund (NewGold) is an Exchange Traded Fund that was listed on The Nigerian Stock Exchange (NSE) in December 2011. It tracks the price of gold and offers institutional and retail investors the opportunity to invest in a listed instrument (structured as a debenture) that is fully backed by gold bullion. Each NewGold security is equivalent to approximately 1/100 ounces of real gold bullion held in a secured stockpile of gold bullion. All gold is kept in the form of London Gold Delivery Bars and Good Delivery Standards are prescribed by LBMA.
银屑病土方 Fund Price银屑病土方 – N5,220
银屑病土方June 26th 银屑病土方
银屑病土方Fund Price银屑病土方 – N8,000
银屑病土方Return银屑病土方 –? 53.3%
银屑病土方Ranking银屑病土方 – First
银屑病土方Commentary:银屑病土方 Gold prices have been on the up since the Covid-19 pandemic took hold of the global economy. Investors are uncertain and as history shows gold prices are always up during market uncertainty. If you are looking for protective investment in times of uncertainty then this is the best performing fund so far.
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FBNH owned The FBN Nigeria Smart Beta Equity Fund is a pure equity fund that invests money predominantly in a portfolio of Nigerian companies, using a rigorous, research-based and tested evaluation system.
The fund provides long-term capital preservation by investing at least 75% of the fund’s assets (excluding cash and cash equivalents) in a diversified portfolio of high-quality companies listed on the Nigerian Stock Exchange. In order to manage liquidity, the fund may also invest up to 25% in short-term money market instruments and deposits with financial institutions.
银屑病土方 Fund Price银屑病土方 – N129.17
银屑病土方Fund Price银屑病土方 – N197.29
银屑病土方Return银屑病土方 –? 52.7%
银屑病土方Ranking银屑病土方 – Second
银屑病土方Commentary:银屑病土方 For a fund that is predominantly focused on equities, this a pretty much impressive performance by all standards. For example, the NSE All-Share Index is down 9.8% year to date. If you are worried about investing in stocks and don’t have the heart for it and you are looking for a mutual fund, then this is the best performing fund out there.
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Investment One’s Vantage Balance Fund (launched in 2002) is a fund focused on long term capital appreciation, which is achieved by maintaining a flexible diversified portfolio of equities, fixed income, money market, and real estate investments. Assets are high-quality equity instruments quoted on The NSE while the bond issuers have an investment-grade rating from a credit rating agency registered by SEC.
银屑病土方 Fund Price银屑病土方 – N2.21
银屑病土方Fund Price银屑病土方 – N2.87
银屑病土方Return银屑病土方 –? 29.9%
银屑病土方Ranking银屑病土方 – Third
银屑病土方Commentary:银屑病土方 This is a Mixed fund as it invests in a diverse pool of assets. Interesting to note that the managers of this fund also have an Equity-Based Fund, a Dollar Fund, and a Fixed Income Fund. But none of them come close to the Balanced Fund. If you are looking for a portfolio with a good mix of investment assets then this is the best performing as of June 2020.
银屑病土方READ ALSO: Why interest rates on treasury bills, bonds crashed银屑病土方
FCMB Asset Management Owned Legacy USD Bond Fund (launched in 2018) is a SEC-registered US Dollar-denominated Collective Investment Scheme, structured as a high-yield mutual fund. The Fund seeks to generate stable income over the long-term. Legacy USD Bond Fund invests in credit-rated US Dollar-denominated fixed income securities issued by the Nigerian Government, Supranational bodies, and Corporate entities.
银屑病土方 Fund Price银屑病土方 – N306.5
银屑病土方Fund Price银屑病土方 – N360.5
银屑病土方Return银屑病土方 –? 24.4%
银屑病土方Ranking银屑病土方 – Fourth
银屑病土方Commentary:银屑病土方 The Legacy Bond Fund is the best performing mutual fund if you are looking for dollar-denominated fixed-income debt securities like Eurobonds. At 24.4% they seem to be holding bonds with good yields and market values respectively. Apart from the Bond Fund, managers of the Legacy Bond Fund also manage a Fixed Income Fund, a Money Market Fund and an Equity Fund. If you are looking to invest in Eurobonds then this mutual fund is the best performing.
Investment One’s Vantage Dollar Fund (launched in 2018) is a SEC registered open-ended Unit Trust Scheme in Nigeria. The Fund seeks to provide investors with a bias for Dollar-denominated securities access to such securities, which ordinarily would be inaccessible to them by virtue of the minimum amount typically required to make such investments. It will invest primarily in Corporate and Sovereign Eurobonds.
银屑病土方 Fund Price银屑病土方 – N401.02
银屑病土方Fund Price银屑病土方 – N469.2
银屑病土方Return银屑病土方 –? 17.0%
银屑病土方Ranking银屑病土方 – Fifth
银屑病土方Commentary:银屑病土方 This is the second dollar mutual fund on the list and the second from Investment One to make the list of best 5. It appears they have a hang on fund management. Dollar Mutual funds are a great source of investments and it is great to see another in the top 5. Thus, if you want another option, then this is one you can also go for.?
银屑病土方Bubbling Under:银屑病土方 The following funds make up the rest of the top 5 on our list and in descending order.
6. AIICO Balanced Fund
7. VI ETF
8. Coronation Fixed Income Fund
9. CEAT Fixed Income Fund
10. United Capital Euro Bond Fund
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