The United Capital Nigerian Eurobond Fund returned 0.5% in June to bring its YTD performance to 3.79%. This represents an annualized return of 7.58%, which, according to the fund manager, beats annualized return of 4.1% credited to its benchmark, Libor+200 basis points. The seemingly non-stellar performance has been attributed to the bearish trends in Eurobonds, although corporate bonds remained resilient through the period.

The fund which came to live in 2017 is worth $5.21 million or N1.6 billion as at June 30 and is an open-ended mutual fund that invests in Dollar denominated Eurobonds floated by the Federal Government of Nigeria and top-tier corporates.

The aim of the fund is to offer investors a hedge against local currency depreciation as well as long term capital preservation and growth. It takes an initial subscription of $1,000 and subsequent investments of $500 to invest in the fund which charges 1.506% management fee in addition to other fees that brings the total expense ratio to 1.679%. The benchmark, the London Interbank Offered Rate (LIBOR) is the average interbank rates at which a selection of banks on the London money market are prepared to lend to each other.

The United Capital Nigerian Eurobond Fund performance is not too different from the performance of its peers or other Eurobond and Dollar funds being managed by various fund managers in Nigeria. The FBN Eurobond USD Institutional Fund returned 3.02% (annualized 6.02%) while its sister fund, FBN Eurobond USD Retail Fund returned 1.76% (annualized 3.42%) for the fiscal year ended June 30, 2018. The current performance by FBN Eurobond USD Institutional Fund is nothing compared with its 2017 corresponding period performance of 12.17% in 2017.

The Stanbic IBTC Dollar fund on the other hand generated a return of 1.73% in the second quarter of the year to bring its YTD performance to 3.65% (annualized 7.3%). Like its peers, this fund beat its bench mark, 6 Months Libor which ended the quarter with 0.62% return and 1.15% for this fiscal year. Stanbic IBTC Dollar 2018 half year performance is much more in line with its 2017 performance than its peers. In 2017, the fund returned 6.26% in a year when its bench mark made 1.48%.

It is doubtful if these funds will repeat their 2017 performance record in 2018 given the events that are unfolding in Eurobond markets as a result of Brexit uncertainties and the sound of drums of trade wars being beaten by the US president as well as the prevailing stability in the local currency. Irrespective of the performance, Nigerian investors are still in love with Euro Bond funds as evidenced by the over subscription of the Legacy Dollar fund which recorded a 144% oversubscription in April.

Business day

About FBN Eurobond Funds

FBN Eurobond Funds is mutual fund that seeks to provide investors with competitive income and total returns in USD by investing primarily in USD denominated debt instruments issued by the Nigerian Government, corporates and financial institutions. The fund is said to be suitable to foreign currency deposit investors that want to mitigate the effects of exchange fluctuations and those that seek to diversify their portfolio

About Stanbic IBTC Dollar Fund

The Stanbic IBTC Dollar Fund’s objective is to foster currency diversification as well as preservation and appreciation of wealth. It also seeks to optimize returns to both retail, institutional and high net worth individuals who have preference for investing in dollar denominated securities by investing a minimum of 75% in USD Fixed Income Securities and 25% maximum in short term USD investment and a maximum of 10% investment.

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.

2 COMMENTS

  1. Well done uche,this is the best wrting for some time,it was very educational,and very detailed,i am impressed,you did target your audience and you offered your readers freedom to chooses,this choice you offered your reader,will spur and makes more connection or seeks more,even for a novice investor,or any Nigerian smart official,who is seeking this information.i.e can Nigeria be better e.g can we have a dollar company even fund floated on the nse as exchange traded company or fund,nothing is impossible in nigeria

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