As the love for high yield and low-risk investments continues to drive Nigerian investors into money market mutual funds and other money market financial products, some asset managers are thinking of converting some of the funds under their management to money market funds. After all, you got to sell what the buyer wants to buy!
One asset management company that has taken that thinking and consideration to a higher level is Vetiva Asset Management Company. In a notice of extraordinary meeting issued to the unitholders of DV Balanced Fund, the asset manager requested the unit holders to attend a meeting by 11:00 am on May 28th, 2019 at 266b Kofo Abayomi Street, Victoria Island, Lagos. Among the issues up for discussion at the meeting is the approval by the unitholders for the conversion of DV Balanced Fund from a Balanced Fund to a Money Market Fund.
The scheme of arrangement relating to the conversion, as contained in available information, includes the fact that the conversion will be consummated at the net asset value (NAV) of the fund as at the date of conversion, which is yet to be determined or fixed. The information also stated that the conversion ratio will be the net asset of the fund, rounded to 2 decimal places while fractional units will be rounded up to the nearest whole number.
When the conversion is completed, the fund’s name will be changed from DV Balanced fund to Vetiva Money Market Fund. Consequent upon the conversion, the trust deed of the DV Balanced fund will be modified to reflect the new objectives and investment policy and strategy of the resulting Vetiva Money Market Fund. The objective of the new fund, Vetiva Money Market Fund, will be “to preserve investors’ capital whilst providing liquidity and maximizing current income, in line with prevailing Nigerian Money Market yields, by investing in a diversified portfolio of money market instruments” while its investment policy will be to seek significant exposure to a diversified pool of money market securities while adhering to an asset allocation that is geared to achieving the investment objectives of the fund.
The Nigerian mutual fund industry is fast becoming predominantly a money market fund-based industry with money market funds accounting for 72.5% of the total asset value of Nigerian mutual funds, as of May 3, 2019. Out of the total net asset value of N772.8 billion, N560.4 billion reside in money market funds.
About the Balanced Fund: The DV Balanced Fund is an open-ended unit trust scheme that seeks to invest in a range of securities, including quoted equities and fixed income securities. The Fund seeks to achieve capital appreciation over time while mitigating volatility associated with investing in the Nigerian equities market by holding an appropriate allocation of the Fund’s assets in fixed income instruments. The fund came alive on April 14th, 2014 with an offer of 20m units of N100 each. As of May 16th, the fund was priced as N104.242 per unit, representing an inception-to-date price appreciation of 4.2%. This is not a very impressive return.
The fund is one of those with good dividend history in the Nigerian mutual fund industry. In December 2016, it paid a 10kobo dividend, in June 2017, it paid N2.00 and again in December 2017, the fund paid a 50 kobo dividend. The climax of that was the N23 dividend per unit pain in April 2018. For those that invested in the fund from inception, they should have received a total dividend of N25.6, representing a return of capital of 26% approximately. The fund charges a 1.5% annual management fee as well as 1% penalty on withdrawals made within the first 90 days of investment. It does not look like the conversion will affect those fees.
About Vetiva Asset Management: Vetiva Asset Management is one of the fund managers that manage multiple funds in Nigeria. In total, it manages six mutual funds (including exchanges traded funds) with a total asset value of N3.4 billion as at May 3rd, 2019 of which the DV Balanced Fund had the lowest net asset value of N112.7 million. The fund manager is reputed for its transparency as the prospectus of their funds are readily available on the web site as well as up to date fact sheets and daily prices.