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Funds Management

Where to make money from investing in 2018

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  • Making extra money in 2018 should be the priority of everyone, regardless of whether you are an entrepreneur or you want to engage in a side hustle.
  • As is often the case, the types of investments you can invest in, the risk and likely return you can earn, are pertinent questions everyone wants answered.
  • As part of our New Year money tips, Nairametrics presents our top investment options for 2018.
  • These investment options are for anyone – whether you have a job already or a business that you already make money from.
  • See them as opportunities to make even more money in 2018.

Equities

This means investing in the Nigerian stock market or as most will like to say, “Buying and selling shares”.

Investment Case: In case you did not know, the Nigerian Stock Exchange returned 42% in 2017 and was one of the best performing stock markets in the world. Stocks have been rallying mainly because foreign investors have resumed investing in Nigeria. This has created an appetite for investing in stocks, resulting in an exponential increase in market their values. This trend is likely to continue in 2018.

2017 Performance: The top 5 stocks this year made between 186 and 227% return in 2017 alone. So, if you had invested in those stocks early in the year and held on till the end, that is how much you would have made. Also, 73 stocks posted positive returns in 2017 as against 38 that reported losses, while 63 stocks posted zero returns. Out of the 73 stocks that posted positive returns, 66 of them posted double digit returns.

Likely risk: Investing in equities is still considered risky by some people, which is understandable. The risk is that you might invest in a stock and lose all your money. However, you could mitigate this risk by careful stock picking and tracking every bit of information about the stock that you buy to ensure that you know when to sell or even buy more.

Likely returns: You can make between 5 and 200% per annum from investing in stocks.

Period: 6 to 12 months

Who is it for: Anyone looking for high returns on their investment but with controlled risk


Cryptocurrencies

This means investing in digital currencies such as Bitcoins, Ether, Litecoin, etc.

Investment Case: Cryptocurrencies are considered to be the future currency of choice for the digital world. Apart from speculators looking to cash in on the rise in values, others see this as the future of money or facilitating transactions, thus they believe that the value will only continue to appreciate.

2017 Performance: Cryptocurrencies posted the best “returns by an asset class” in the world in 2017. Its flagship currency, Bitcoins, returned about 1000% in 2017 as demand surged all over the world. Interesting to note that at 1000% return, Bitcoin did not make the top 10 list of Cryptos around the world with best return in 2017. It was a distant 14th

Likely risk: Cryptocurrencies are also the riskiest investments out there. They are highly volatile and often incur huge price swings on a daily basis. There are also many of them out there, some of which are likely scams or may never appreciate in value.

bitcoin train

Likely returns: You can make between 50 and 300% per annum investing in cryptocurrencies.

Binance

Period:  3 months to one year.

Minimum amount: We recommend starting with $500.

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Who is it for? Anyone with a huge appetite for volatility induced risk and return


Treasury Bills

This is a government short dated fixed income security that is offered for 91 days, 182 days and 364 days tenors.

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Investment Case: Treasury bills are one of the safest investments for anyone with loose cash who is looking to save towards the future. The returns are steady with interests paid up front.

2017 Performance: It was one of the most popular investments in 2017 due to the high interest rates it attracted in the early part of the year. Interest rates were as high as 20% for one-year treasury bills. It dropped to about 15% by the end of 2017.

Likely risk: Treasury bills have zero risk as the government is not expected to default.

Likely returns: You can make between 10 and 15% per annum in 2018.

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Period: 91 days, 182 days and 362 days.

Minimum amount: N1 million and above; anything less is not worth it.

Who is this for: I have idle cash for the short term, want to invest myself but hate risk


FGN Bonds

This is a government fixed income security that is offered for 2 years, 5 years, 10 years and 15 years tenors.

Investment Case: FGN Bonds are one of the safest investments in the country as they are guaranteed by the government. They are recommended for anyone with loose cash who is looking to save towards the future, and earn a fixed income over a long period of time. Interest is paid biannually and annually.

2017 Performance: FGN Bonds yields were high in 2017 as government increased their level of borrowings to fund the budget. The more government wants to borrow, the more it is willing to pay as interest. The 2018 budget is also expected to be financed mostly with debt, some of which will be naira debts.

Likely risk: FGN Bonds have zero risk as the government is not expected to default.

Likely returns: You can make between 13 and 18% per annum in 2018.

Period: Minimum of 2 years though you can sell whenever you want.

Minimum amount: Anything less than N1 million would not yield meaningful profit.

Who is this for: I have idle cash for the long term, want to invest myself but hate risk


Corporate Bonds

These are company offered fixed income security that is offered for 2 years, 5 years, 10 years and 15 years tenors.

Investment Case: Corporate Bonds are offered by large corporations looking to borrow money from the public in exchange for periodic interest payments. They are recommended for anyone with loose cash who is looking to save towards the future, and earn a fixed income over a long period of time. Interest is paid biannually and annually.

2017 Performance: There were a number of corporate bonds issued in 2017. Notable ones include Dufil, Forte Oil and Lafarge and they have all issued corporate bonds in 2017 at rates between 17% and 19%. None of these companies have defaulted in meeting their repayment obligations.

Likely risk: Unlike FGN Bonds, Corporate Bonds do not have zero risk. However, the companies issuing the bonds are assigned credit ratings by rating agencies. The ratings are reviewed periodically.

Likely returns: You can make between 15 and 18% per annum in 2018.

Period: Between 3 months and 10 years. You can also sell whenever you want.

Minimum amount: Anything less than N1 million would not yield meaningful profit.

Who is this for: I have idle cash for the long term, want to invest myself but can take on moderate risk.


Mutual Funds

This is basically giving your money to experienced fund managers to invest on your behalf in exchange for high returns. You also get to pay them fees for this.

Investment Case: Mutual funds and other types of funds such as Exchange-Traded Funds (ETFs), Real Estate Investment Trusts (REITs) are viable investment options for anyone who has the cash to invest but no time to manage and monitor their investments.

2017 Performance: Data from the Security and Exchange Commission reveals that most mutual funds performed relatively well in 2017. Net Asset Value rose from about N215 billion at the end of 2016 to about N401 billion by December 2017.  Returns ranged from between 17 to 49% per annum in 2017.

Likely risk: The risk of investing in mutual funds, or any funds for that matter, is that your investments may not be managed well. This can result in very little or no returns. It can also lead to loss of capital, even though this is highly unlikely. You also get to pay the fund managers fees whether or not they make money for you or not.

Likely returns: You can make between 9 and 14% per annum in 2018.

Period: 3months to 12 months. Though you can sell whenever you want

Minimum amount: At least N50,000 monthly.


Real Estate

This means buying and selling real estate, or owning one in exchange for rental income.

Investment Case: Investors in real estate point to the fact that real estate investment has always been a perfect hedge against inflation. They also suggest that it inherently has very strong capital appreciation over time. Some people prefer to purchase land in choice areas, hoping that in a few years’ time, property values in these locations will more than quadruple.

2017 Performance: There is no official data on performance of real estate in the country.

Likely risk: The risk of investing in real estate, relates mainly to fraud and falling property values. Due to the difficulty often encountered in verifying who owns properties, most investors end up buying real estate that are non-existent or owned by someone else who is not the seller.

Likely returns: If you are buying a property to rent, then expect rental yields to be anything between 2 and 6% per annum. This means a property worth N100m will likely fetch you rent of N2 million per annum. It is interesting to note that property yields are often inversely proportionate to property values.

Period: Long term

Minimum amount: You should have at least N5 million. Your initial capital is also dependent on the location of the property.


Collective Investment Schemes

This is basically pooling funds together with your friends and family and giving same to a professional to manage on your behalf or you manage yourselves. For example, Investment Clubs, Cooperatives etc.

Investment Case: Collective investment schemes are very attractive to investors who are looking for higher returns on their investments from a diverse portfolio. CIS schemes can invest in real estate, equities, bonds, cryptocurrencies, farming or any business they deem fit.

2017 Performance: There is no official data on performance of real estate in the country.

Likely risk: The risk of investing in CIS is that the fund managers could mismanage it and rather than get the higher returns that you expected, erode the value of your original investment

Likely returns: Returns are typically set by the owners of the CIS. We have seen some gun for returns as high as 25% annually. Some CIS also have lock-up periods for paying dividends, preferring to reinvest their profits compounded over a period of time.

Period: Long term

Minimum amount: Most CIS make monthly contributions of about N50k monthly.

Making any of these investment choices is dependent mainly on your choices and the capital you have available to you. But no matter your decision, ensure that you earn more in 2018.


You will observe that there are no network marketing or multi-layer marketing schemes. We do not believe in such schemes and as such can’t list any here. We also omitted forex trading because we do not believe it’s a viable form of investments, especially in Nigeria.


Before you make that investing decision, make sure that whatever option you choose meet these criteria/rules;

  • I can check the value of my investment whenever I like, real time, online
  • The value of my portfolio is determined by the market and not by anyone or group of influencers
  • You can also check the value or price of the assets in your portfolio online, 24/7
  • You can liquidate your investment whenever you want and without restrictions
  • There are no middle men, except broker facilitated trading engines.
  • The market is regulated by government or self regulated by the internet community

 

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

Funds Management

Nigeria’s pension asset under management hits N12.3trillion in December 2020

Nigeria’s pension asset under management hits N12.3trillion in December 2020.

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PenCom, unremitted pensions, Lagos State Pension Commission, LASPEC, Pension Fund Assets, PFAs make N1.69 trillion ROI  

Nigeria’s pension asset under management, as of December 2020, stands at N12.3trillion which represents a modest growth of 20% year-on-year and 0.003% month-on-month (no significant change), according to the monthly report by National Pension Commission (Pencom).

According to the report, total RSA funds increased by 20% year-on-year while the funds under both existing schemes and Closed Pension Fund Administrator (CPFA) as well, grew by 21% year-on-year.

Other Key highlights

  • As of December 2019, investments in FGN Securities accounted for 72% of the total pensions assets fund, out of which 73% was invested in Bonds and 26% in Treasury Bills.
  • As of December 2020, investments in FGN Securities accounted for 66% of the total pensions assets fund, out of which 84% was invested in Bonds and a paltry 8% in Treasury Bills, which is not unrelated to the subsisting very low yield of TB in the money market.
  • The investments in FG Bonds represent 56% of the total pension assets fund under management. The renewed and increased investments in FG Bonds can be attributed to the attractiveness of the yields of FG bonds over the Treasury Bills.
  • RSA Fund II and III accounted for 89% of the total RSA funds and 69% of the total pension assets under management as of December 2020, while others – Funds I, IV and V accounted for 31%
  • All the RSA funds, including existing scheme and CPFA recorded year-on-year growth as follows: Existing scheme (13%), CPFA(28%), Fund I (49%), Fund II(19%), Fund III(21%), Fund IV(18%).
  • As of December 2020, only N80.54million was invested under the newest RSA fund (Fund V) – specifically created for micro pensions.

What you should know

There are 4 pension fund types, with the newest recently introduced for the micro pension scheme.

The Multi-Fund structure is a framework that aims to align the age and risk profile of RSA holders, as follows:

  • Fund I – This is an optional fund. Contributors must write formally to opt for this Fund.
  • Fund II – This is the default fund for contributors aged 49 and below.
  • Fund III – This is the default fund for contributors aged 50 and above.
  • Fund IV – This is the Retiree Fund.

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Exclusives

Best performing Mutual Funds in January 2021

According to data from the SEC, 49.2% of the 118 registered funds recorded positive growth in January 2021

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Best Mutual Funds in Nigeria

Mutual funds are one of the fastest-growing asset classes in Nigeria, as data from the Security and Exchange Commission (SEC), shows that 49.2% of the 118 registered funds recorded positive growth in January 2021.

A mutual fund is a type of financial vehicle made up of a pool of money collected from various investors, with the aim of investing them in securities like stocks, bonds, money market instruments, and other assets.

According to SEC, a total of 118 mutual funds were registered as of January 29, 2021, with a net asset value of N1.57 trillion across several fund types.

Nairametrics tracked the performance of these mutual funds by comparing the fund prices as of 31st December, 2020 with the fund prices as of the last trading day of January 2021.

Below were the top-performing mutual funds in the month of January 2021. We also highlighted their performance in terms of changes in net asset value and included profiles of the funds as described on their websites.

READ: Investors pump N7 billions into New Gold ETF


Lotus Capital Halal ETF – Lotus Capital Limited (Exchange Traded Fund)

The Lotus Halal Equity Exchange Traded Fund “LHE ETF” is an open-ended fund that tracks the performance of the NSE-Lotus Islamic Index (NSELII). It is designed to enable investors obtain market exposure to the securities of the constituent companies of the NSE-Lotus Islamic Index and to replicate the price and yield performance of the index.

December 31st, 2020

Fund Price – N12.73

January 29th, 2021

Fund Price – N13.66

Return – 7.31%

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Ranking – Fifth

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Commentary: This is an Exchange Traded Fund by Lotus Capital Limited, which grew by 7.31% in the month of January. The fund also grew significantly by 51.7% in the year 2020, indicating that the fund is a delight to its investors. Also, the net asset value stood at N655.04 million as of 29th January, 2021, indicating 6.76% growth compared to N613.59 million recorded as of 31st December, 2020.

READ: Understanding how Mutual Funds and ETFs work in Nigeria

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Stanbic IBTC Aggressive Fund – Stanbic IBTC Asset Mgt. Limited (Equity Based Funds)

The Stanbic IBTC Aggressive Fund (SIAF), which was launched in June 2012, is an open-ended fund that invests a minimum of 60% of its portfolio in equities of companies listed on the Nigerian Stock Exchange (NSE) and a maximum of 40% in fixed income securities. Notably, the expense ratio for the fund is 1.5%.

December 31st, 2020

Fund Price – N2,525.55

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January 29th, 2021

Fund Price – N2,713.93

Return – 7.46%

Ranking – Fourth

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Commentary: Stanbic IBTC Aggressive Fund is the second-best performing Equity-Based fund in the month of January, growing by 7.46% to stand at N2,713.93 as of 29th of January, 2021. The net asset value also grew by 7.43% to close at N340.8 million.

READ: DV Balanced Fund to become a Money Market Fund


FSDH Dollar Fund – FSDH Asset Management Ltd. (Fixed Income Funds)

This is an open-ended mutual fund that invests in US Dollar denominated Fixed Income Securities issued by Nigerian Sovereign and Corporate Entities. The objective of the fund is to provide customers with the opportunity to invest in dollar-denominated instruments. Meanwhile, the minimum amount required to invest in the fund is $1,000.

December 31st, 2020

Fund Price – N415.1

January 29th, 2021

Fund Price – N447.7

Return – 7.85%

Ranking – Third

Commentary: The fixed income fund managed by FSDH Asset Management, recorded growth of 7.85% in January from N415.1 recorded as of the end of 2020 to stand at N447.7 at the end of January. The net asset value grew by 18.41% to close at N1.002 billion.


Paramount Equity Fund – Chapel Hill Denham Mgt. Limited (Equity-based Fund)

Paramount Equity Fund is Nigeria’s oldest mutual fund, which invests in a broad range of high-quality equities and fixed income securities. The fund aims to provide an investment vehicle that will enable unit holders to achieve consistent capital appreciation over a medium-to-long term.

December 31st, 2020

Fund Price – N16.27

January 29th, 2021

Fund Price – N17.56

Return – 7.93%

Ranking – Second

Commentary: This is an Equity Based Fund managed by Chapel Hill Denham Management, which grew by 7.93% in the month of January 2021 to stand at N17.56 as of 29th of January 2021, while the net asset value grew by 8.22% to stand at N598.19 million.


Vantage Dollar Fund – Investment One Funds Management (Fixed Income Fund)

Vantage Dollar Fund is an open-ended Unit Trust Scheme by Investment One Funds. The Fund seeks to provide investors with a bias for Dollar denominated securities an access to such securities, which ordinarily would be inaccessible to them by virtue of the minimum amount typically required to make such investments.

December 31st, 2020

Fund Price – N559.87

January 29th, 2021

Fund Price – N502.9

Return – 11.33%

Ranking – First

Commentary: This is the best performing mutual fund in the month of January 2021 and the only fund with a double-figure yield in the month under review. Vantage Dollar Fund grew by 11.33% to stand at N502.9 as of 29th of January 2021 while the net asset value also grew by 10.93%. This is quite an impressive performance as the fund primarily invests in Corporate and Sovereign Eurobonds.


 

Bubbling under……

The following funds make up the rest of the top 10 our list in ascending order:

AXA Mansard Equity Income Fund – AXA Mansard Investments Limited (Equity Based Fund)

Return – 6.69%

VETBANK ETF – Vetiva Fund Managers Limited (Exchange Traded Fund)

Return – 6.82%

PACAM Equity Fund – PAC Asset Management Limited (Equity Based Fund)

Return – 6.86%

Legacy Equity Fund – First City Asset Management (Equity Based Fund)

Return – 7.14%

VCG ETF – Vetiva Fund Managers Limited (Exchange Traded Fund)

Return – 7.16%

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