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Top 10 high-yield money market funds that beat inflation in Nigeria

Sometimes, the fear of poor stock market performance forces conservative and risk-averse investors to sit on their cash…

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Top 10 high-yield money market funds that beat inflation in Nigeria

It is not uncommon, but a risk management strategy for investors (who worry that stocks are either too expensive or not performing well), to buy some downside protection with yield. On the alternative, sometimes, the fear of poor stock market performance forces conservative and risk-averse investors to sit on their cash rather than risk the possible loss in the market. But prudence requires striking a balance between sitting on “barren” cash and losing it all in the market. This is where money market funds come in and play that risk management role of not losing the yield that would have, otherwise, been lost if an investor sits on his or her cash instead of losing it all due to poor performance in the stock market.

Money Market Fund Yield Vs Inflation Rate

The role of money market funds in giving investors the best of both Worlds, is even more so when the yields on such funds out-pace the rate of inflation. The latest available data from the National Bureau of Statistics indicates that the rate of inflation moderated slightly in February to 11.31%. With that, inflation rate has fallen for the second consecutive month. This is good news given that inflation rate in Nigeria has historically averaged 12.46% since 1996 to 2019, although it reached an all time high of 47.56% in January 1996.

For investors, especially those investing in fixed income and money market funds, this news may be heart warming as the relationship between inflation and money market yield is an important decision variable. Analysts at Quantitative Financial Analytics went around to find out the current yield on money market funds in Nigeria with a view to comparing it with inflation.

According to the data gathered by Quantitative Financial Analytics, the average interest rate on money market funds is currently 13.06% per year. This means that with 11.31 percent annual inflation, N100,000 invested in a money market account at 13.06% percent would gain about N1,750 in purchasing power over the course of a year. That may not be too encouraging but it is better than losing out in purchasing power terms.

Shop Around for High Yield

Investors can do quite a bit better than 13.06% percent if they shop around for higher paying funds. To help in this shopping, here are the top 10 high yield money market mutual funds in Nigeria:

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(1) United Capital Money Market Fund:

Yield: 14.6%
Expense Ratio:1.6%
Fund Manager: United Capital Asset Management Company.

(2) FBN Money Market Fund:

Yield: 14.37%
Expense Ratio:0.9%
Fund Manager: FBN Asset Management Company.

(3) ARM Money Market Fund:

Yield: 13.76%
Expense Ratio: Not Available
Fund Manager: ARM Asset Management Company.

(4) Stanbic IBTC Money Market Fund:

Yield: 13.34%
Expense Ratio: Not Available
Fund Manager: Stanbic IBTC Asset Management Company.

(5) AIICO Money Market Fund:

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Yield: 13.28%
Expense Ratio: Not Available
Fund Manager: AIICO Asset Management Company.

(6) Cordros Money Market Fund:

Yield: 13.27%
Annual Management Fee: 1%
Fund Manager: Cordros Asset Management Company.

(7) Coronation Money Market Fund:

Yield: 13.27%
Expense Ratio: 0.29%
Fund Manager: Coronation Asset Management Company.

(8) Greenwich Plus Money Market Fund:

Yield: 13.25%
Expense Ratio: Not Available
Fund Manager: Greenwich Asset Management Limited.

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(9) PACAM Money Market Fund:

Yield: 12.96%
Annual Management Fee: 1%
Fund Manager: PACAM Asset Management Limited.

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(10) AXA Money Market Fund:

Yield: 12.96%
Annual Management Fee: 1.25%
Fund Manager: AXA Asset Management Limited.

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.

21 Comments

21 Comments

  1. Brian

    March 18, 2019 at 11:30 am

    Good job Team!

    Please could you elucidate what’s meant by expense ratio?

    Thank you in anticipation.

    • Emeka Mba

      March 19, 2019 at 4:23 pm

      Hi Brain. I believe is the total percentage of fund assets used for administrative purposes. Perhaps an annual management fee.

    • uchenna Ndimele

      March 21, 2019 at 3:39 am

      Fund managers charge fees to manage your fund, that is called management fee, some of them charge for making profits, that is performance fee, in addition, they charge for third party services like audit, legal, admin, etc. The percentage of the total of these fees in relation to the asset value of the fund, is the expense ratio. I will be doing a basic article on this

  2. Pelewura, Patrick

    March 18, 2019 at 8:48 pm

    Thank you for sharing your knowledge but would you please explain to me the meaning of:

    1. Expense ratio and
    2. Annual management fee

    Thanks in anticipation.

    • uchenna Ndimele

      March 21, 2019 at 3:40 am

      Thanks for your comment, I will do an article on the basic expense ratio and management fee, watch out for it

  3. Mena

    March 19, 2019 at 7:49 am

    Love the analysis. I’m informed. Thanks.

  4. Emeka Ogbonnaya

    March 29, 2019 at 7:10 pm

    Hey, thanks for this article.
    I’d really like to know if the yield is over 12 month period or 30 day period?

    • uchenna Ndimele

      April 2, 2019 at 12:45 pm

      Yes, those are annualized returns (over 12 months) and not monthly

  5. uchenna Ndimele

    April 2, 2019 at 12:44 pm

    Yes, those are annualized returns (over 12 months) and not monthly

  6. tolu

    April 5, 2019 at 10:51 am

    hi,

    I wanted to make payment and subscribe for information about your capital market data but cannot seem to find it. Please guide? thanks!

  7. Chidi

    May 1, 2019 at 3:26 pm

    Is it better to buy a mutual fund with a a 100 naira value or 1 naira value. Those the value affect your overall interest. Thanks

  8. Stephen

    May 5, 2019 at 12:56 pm

    Can you shed more light on the monthly profit calculation of say a N100,000 money market fund investment please.

  9. Anonymous

    May 13, 2019 at 2:56 pm

    Thankx for the post pls which one do you recommend for newbies.

  10. Ani J. O.

    May 14, 2019 at 11:51 am

    I’m glad you shared your idea with us. Thank you

  11. Anonymous

    June 26, 2019 at 9:41 am

    Hi, thanks for the performance comparison. It’s not clear what period (year) these yields represent. Are these 2018 yields? Are you able to provide this detail please? Thank you.

  12. Uchey Ndimele

    June 27, 2019 at 12:08 pm

    The yields on the report were YTD yield as ta March 2019. I will do similar report soon

  13. Anonymous

    August 8, 2019 at 12:01 pm

    Good work, keep it up

  14. Ezinwa

    October 24, 2019 at 8:43 am

    Can you shed more light on the monthly profit calculation of say a N100,000 money market fund investment please.

  15. Anonymous

    March 9, 2020 at 5:43 pm

    This topic needs to refreshed or rejoinder provided considering the recent drop in T-Bill rates. The rates from these funds managers have dipped considerably. So Nairametrics Team, kindly advise us again on those investments that can beat inflation in Nigeria today.

    • Olakanmi

      March 16, 2020 at 1:07 pm

      Yes, please answer the question. We are waiting for it please.

  16. Uzo

    July 6, 2020 at 9:48 am

    Hi. It would really help to have an update on this! Kindly consider.

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Hospitality & Travel

COVID-19: Transcorp Hotel loses about N1 billion every month- CEO

Transcorp Hotels has seen its revenues ravaged by COVID-19 induced lockdowns and implementing measures to save itself from further losses

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Transcorp Hotels, owners of one of Nigeria’s largest hotel Transcorp Hilton reports it loses about N1 billion every month due to the Covid-19 pandemic.

This was disclosed by the Managing Director/CEO of Transcorp Hotel Plc, Dupe Olusola, during an interactive session on Thursday. According to her, the management of the hotel met and decided to ensure that it kept costs down by restructuring its business strategy, diversifying into asset-light business models, and reducing the workforce, among others.

Olusola further disclosed that the company had suspended further commitment to buy fixed assets and operating equipment, as well as reduced its energy consumption and maintenance costs. She also confirmed Transcorp will be cutting back on all capital investments this year and in the foreseeable future until the outlook for the economy improves.

The hospitality sector has been one of the hardest-hit since the Covid-19 broke in late February. Data from the National Bureau of Statistics also reveal the sector contracted by as much as 40% in the second quarter of 2020, officially falling into recession.

Nairametrics participated in the stakeholder’s session and noted a few critical remarks from the interview.

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Below is the excerpt of the interview session:

How much has COVID-19 eaten into the fabric of Transcorp Hotels?

We had a drastic decline of over N9 billion. In March alone, we witnessed a N456 million loss. We have to remember that in March, there was a partial lockdown when everyone was trying to figure out what was happening. We were at N1.03 billion loss in April alone and this has continued to be the story every month. In June, we dropped by about N840 million.

How will this development (loss) affect your staff strength?

We struggled to ensure that we would not ask people to go initially, that was our priority. We keep a 50% pay cut for staff that is not working and 100% for the ones working. To keep the business running, we definitely have to let go of at least 40%.

We engaged the staff Unions, both the Junior and Senior staff, before the implementation of that. We will ensure that employees are properly taken care of. The occupancies we have now are below 30% and with that, it’s impossible to have everyone around.

What is important to us is that we must ensure we are able to keep the hotel running as a national asset, because it has been in existence for over 30 years.

We have ensured that we keep as many jobs as we can within this time frame, so this is an opportunity for us to engage the media and carry you along before such exercise. We have engaged actively with our employees and other key stakeholders. At the occupancy level that we are seeing, it is impossible for us to sustain the employees that we have to keep our doors open.

Precisely, how many will you lay off?

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It is definitely a great burden to even consider a lay-off but we don’t have a choice but to keep the business afloat. We have over 1,000 staff and it appears we will not need more than 400 staff to ensure we keep the hotel running. What is happening is beyond everybody and it is just a situation we have found ourselves in.

What is your outlook for 2020, any hope of returning to the pre-COVID era?

We expect to get to the pre-COVID era by 2024 globally, because it requires the gathering of the people in preparing for events, etc. The new normal is real. We expect things to go back to what they used to be in Nigeria by 2024 also. We are not expected to do more than 30% of our occupancy this year and that is significantly low, and by this time next year, we don’t expect to see anything more than that. So, this is our trying time.

Strategy to sustain Balance Sheet before the end of 2020

We are a hotel business, the food, room and the events we hold are our sustainers. We are definitely going to end at a loss in 2020. As I said, COVID will still be around in 2024. We will try as a business to be innovative, to look at different ways. We are reporting losses of almost N1 billion on a monthly basis and this is significant to us. We hope they can come up with some vaccination to help reduce the impact of the pandemic so that businesses can begin to pick up.

Any palliatives from the government to hotels?

Governments across the world have given palliatives to hotels, but here there is no such package for big hotels in Nigeria. We have engaged at all levels of government on payroll support, tax rebate, support for employees, actively and widely as possible. Yet, these have not yielded any support, unfortunately. This is really why we have gotten to the point of disengaging our own staff. We have not seen any support from the government to actually help us.

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How do you aim to restructure your loans and are there plans to raise funds?

This year is really just about losses. We have met with our stakeholders and lenders to work out how we can restructure our loans, considering some palliatives CBN brought on board like interest rate of 5%. We met the Bank of Industry (BOI) to get interest rates on our loan reduction. Some of these got a couple of positive responses. We are also considering raising funds through the right issues. We are raising N10 billion in order to pay off some of our existing obligations.

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How will virtual tools affect your business model and future plans?

We are working round the clock to bring in solutions in line with the new normal to our guests and customers. How do we provide what they are looking for? How do we provide physical and virtual conferencing? We have also come up with Drive-in Movie Cinema, among others. We are going to ensure we run asset-light strategies to bring in new initiatives that can continue to help us remain standing in the business.

On our future plans, we have suspended our expansion plans. For instance, we initially planned to set up hotels in Port-Harcourt, Rivers State, which has been suspended for now. Also, we suspended further commitment to buy fixed assets and operating equipment as well as reduced our energy consumption and maintenance costs.

Bottom Line: The hotel faces a tipping point and as things stand survival is what is its priority.

  • To do so the hotel will have to make tough decisions some of which as job cuts, reduction in overheads, and suspension of capex related activities.
  • This will be a very painful restructuring process for the hotel group but it appears this is the only way it can survive.

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Financial Services

CBN grants Greenwich Trust Limited operational license for merchant banking

CBN has upscaled Greenwich Trust Limited to the status of a merchant bank.

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NSE Market Data, NSE records total transactions of N121.99 billion in August , 2019 events in the Nigerian capital market and outlook for 2020, Why you might need a capital market lawyer

The Central Bank of Nigeria (CBN) has upscaled Greenwich Trust Limited and granted it, operational license for merchant banking in the country.

According to an official statement released by the firm, the entity would be known as Greenwich Merchant Bank Limited. This license allows Greenwich Merchant Bank to upscale and offer such diverse services as corporate banking, investment banking, financial advisory services, securities dealing, treasury wealth and asset management, etc., making it possible to provide increased value to stakeholders beyond its previous scope.

Recall that the minimum capital requirements for establishing a merchant bank according to Merchant Banking Licensing Regulations in 2010 are N15 billion

(READ MORE: CBN debits banks N216.1 billion for CRR compliance)

With the addition of Greenwich Merchant Bank, Nigeria now has six merchant banks. The others are; FBN Quest, Coronation Merchant Bank, DSH Merchant Bank, Nova Merchant Bank and Rand Merchant Bank.

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About Greenwich Trust Limited

Greenwich Trust Limited is an investment banking firm duly registered with relevant authorities such as the Nigerian Securities and Exchange Commission (SEC). It is a diversified firm with subsidiaries such as Asset management, GTL Properties, GTL Securities Limited, Cedar Express Limited and Meyer Plc.

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Business News

Emirates Airlines banned from operating in Nigeria

UAE’s Emirate Airline has been banned from operating in Nigeria.

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Just in: FG bars Air France, KLM and other foreign airlines, FG to spend N13 billion for automation projects in 4 airports, domestic flights, international passengers, Coronavirus: FG enforces immediate screening of travellers at airports with new directive

Emirates Airline has been added to the list of airlines which have been banned from operating in  Nigeria. The ban will take effect from the 21st of September.

This was announced by the Minister of Aviation, Hadi Sirika in a social media statement on Friday.

“The PTF subcommittee met today with EU Ambassadors to discuss Lufthansa, Air France/KLM ban. The meeting progressed well. Emirates Airlines’s situation was reviewed & they are consequently included in the list of those not approved, with effect from Monday the 21st Sept 2020.” Sirika stated.

This comes as the UAE government has been accused of not renewing visas of Nigerians in Dubai and also rumours of a VISA ban for Nigerians applying for visas.

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Last month, the UAE embassy in Nigeria denied there is a VISA ban on Nigerians entering the Middle Eastern country. They said: “At the onset of the COVlD-19 pandemic, the UAE took a number of precautionary measures to combat the virus’ spread, including the temporary suspension on issuing UAE visas for all nationalities as of March 17, 2020.

After entering the recovery phase of the pandemic, the UAE eased some measures on July 7, permitting visitors from various countries to adhere to the necessary precautionary measures, including by showing negative PCR test results within 92 hours of travelling to the UAE. This includes those visiting from Nigeria.”

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