As stock-taking and post mortem analysis of 2019 continues, analysts at Quantitative Financial Analysis have gone through their analysis tools to filter Nigerian mutual funds according to their performances in 2019. In one of my articles on why you should measure the performance of your portfolio of investment, I gave some convincing reasons for doing just that.
If you do not know where you are, in relation to your investment, you may not know if the strategy you are following will lead you to the promised land of investment goals. So, knowing the performance of your investment helps you know when to engage in any form of strategy shift or portfolio rebalancing.
Knowing how good or bad your mutual fund is doing in comparison with its peers, (peer comparison), helps you to know if you should continue with your current investment manager if you need to try another one, or even diversify across managers. The performance of your portfolio helps you know whether your asset selection is good enough in helping you achieve your financial goals.
Unfortunately, one bad part of knowing the performance of your fund is that it can make you sad, especially if you are losing money. With that summary of the need to know how your fund is doing, it may be imperative to warn you upfront that past performance is not a guarantee of future performance. This analysis is made on a compilation of fund data released by the Securities and Exchange Commission (SEC).
New Gold ETF leads the pack
In 2019, New Gold Etf took the lead as the best performing fund with a return of 161%, having ended the year at a unit price of N5,220 from previous year end close of N2,000. New Gold ETF is about the most volatile fund in Nigeria, and its risk-reward ratio is 19.33 to 16.55.
Vetiva Sovereign Bond ETF
They blazed the trail as the second best performing fund after recording a performance of 26.39%, by ending the year at unit price of N202.44 from its previous year-end close of N159.85. The fund, which benefits from positive price changes and exchange rate volatility, has a risk-reward ratio of 2.74 to 7.52.
United Capital Euro Bond Fund
It recorded a performance of 23.83% to take the third position of best fund performers. Again, benefiting from the volatility in the local currency, the fund rose from a previous year-end close of N32,904.26 to end 2019 at N40,746.82. On the risk-reward spectrum, the fund stands at 2.52 to 6.79.
Does size affect performance?
In many endeavours in life, the question of whether size affects performance always rears its ugly head at one time or the other. In the mutual fund arena, that question often comes to investors’ minds when looking at funds to invest in.
Though the effect of size on performance is a topic I would like to write in more detail about, suffice it to say here that only one of the many funds being managed by the largest asset management company in Nigeria, the Stanbic IBTC Asset Management company, made it to the list of high performers in 2019.
Even at that, its flagship fund, the Stanbic IBTC Absolute fund, ended up at the ninth position out of the ten best performing funds. That begs the question, does size matter? Be that as it may, below is the list of the 10 best performing mutual funds in 2019.
Best Performing Fund
- Name of Fund: New Gold ETF
- YTD Performance %: 161%
- YTD Gain per unit: N3,220
Second Best Performing Fund
- Name of Fund: Afrinvest Equity Fund
- YTD Performance %: 47.62%
- YTD Gain per unit: N47.62
Second Best Performing Fund
- Name of Fund: Vetiva S&P Nigeria Sovereign Bond Fund
- YTD Performance %: 26.39%
- YTD Gain per unit: N42.19
Third Best Performing Fund
- Name of Fund: United Capital Euro Bond Fund
- YTD Performance %: 23.83%
- YTD Gain per unit: N7,842.56
Fourth Best Performing Fund
- Name of Fund: ACAP Income Fund
- YTD Performance %: 22.34%
- YTD Gain per unit: N0.14
Fifth Best Performing Fund
- Name of Fund: Coronation Fixed Fund
- YTD Performance %: 15.73%
- YTD Gain per unit: N0.18
Sixth Best Performing Fund
- Name of Fund: Nigeria International Debt Fund
- YTD Performance %: 14.77%
- YTD Gain per unit: N40.37
Seven Best Performing Fund
- Name of Fund: Kedari Investment Fund
- YTD Performance %: 14.68%
- YTD Gain per unit: N18.37
Eight Best Performing Fund
- Name of Fund: Stanbic IBTC Absolute Fund
- YTD Performance %: 13.88%
- YTD Gain per unit: N453
Nine Best Performing Fund
- Name of Fund: Legacy Short Maturity Fund
- YTD Performance %: 12.65%
- YTD Gain per unit: N0.41
PFAs investment in FGN securities rises by 3.7% in November 2020
RSA registration marginally increased by 0.17% to 9,188,475 as at November 2020.
The Pension Fund Administrators (PFAs) have increased their investments in Federal Government of Nigeria securities by 3.7% to N8.14 trillion in November 2020.
This is according to recent data from the National Pension Commission (PenCom), which revealed that the amount invested by PFAs on FGN securities including; Bonds, Treasury Bills, etc., increased from N7.85 trillion as of October 2020 to N8.14 trillion by the end of November 2020.
The breakdown of the amount invested on various FGN securities within the period under review are:
- FGN Bonds got the lion’s share of N7.38 trillion as of November 2020, accounting for 90.7% of the total amount invested in FGN securities for the aforementioned month. This indicates a growth of 4.3% Month-on-Month.
- Investment in Sukuk bond increased to N100.07 billion in November 2020, up by +6.9% Month-on-Month.
- Investment in Treasury Bills declined to N642.03 billion, down by -1.7% Month-on-Month.
- Investment in Agency bonds also declined to N6.03 billion, down by 50.9% Month-on-Month.
- Investment in green bonds declined to N11.8 billion, down by 10.6% Month-on-Month.
- Investment in state government securities stood at N150.59 billion, down by 2.5% Month-on-Month.
Upshots: The increased investment in FGN securities by PFAs within the aforementioned period might be attributable to an earlier order by CBN which prohibited PFAs from OMO Auctions. The order redirected the investment focus of most PFAs, with many opting for other low-risk FGN securities, possibly explaining why the increase occurred.
What you should know: Nairametrics had earlier reported that CBN had restricted OMO auctions to banks and foreign investors.
- The Net asset value of all PFAs in the country as of November 2020 stood at N12.3 trillion, marginally up by +1.98% Month-on-Month.
- Total RSA registration for the aforementioned period also increased by 0.17% to 9,188,475.
Nigeria’s pension funds continue to divest from treasury bills
Since the beginning of 2020, pension fund managers have moved out about N1.112 trillion of treasury bills investments into mostly FGN Bonds.
As the low-interest regime that characterized most of 2020 continues with no immediate sign of an increase, pension fund managers have also continued to rid their portfolios of treasury bill investments.
Analysis of the recently released September 2020 edition of Pension Fund assets, by the Pension Commission of Nigeria, PenCom, shows that pension fund managers reallocated their assets away from treasury bills to FGN Bonds.
In the month of September 2020, according to the latest report, pension fund managers closed out of treasury bill positions worth N0.224 trillion while loading up on FGN bonds worth N0.254 trillion. Since the beginning of 2020, pension fund managers have moved out about N1.112 trillion of treasury bills investments into mostly FGN Bonds.
At the beginning of 2020, total pension fund assets invested in treasury bills stood at N1.88 trillion, but that has fallen to N0.78 trillion as at the end of September 2020. Put in another way, as at the end of 2019, 18.4% of pension fund assets were invested in treasury bills but as at September 30, 2020, pension funds’ treasury bill investment stood at 6.7%
Implications for domestic borrowing and monetary policy
Treasury bills serve a whole lot of purposes for the government. They are used as a means for the government to borrow to cover short term budgetary deficits as well as a means for the Central Bank to manage the supply of money and its inflationary effects.
With the increasing and seeming lack of interest by pension fund managers, who, usually are big players in the treasury bill market, the government may find it a bit problematic raising the much-needed domestic borrowing from them.
In like vein, the Central Bank’s ability to implement monetary policies through treasury bills and others, open market operation, may also suffer. May be, fiscal policy may become a more potent instrument of economic management, if that happens.
Nigeria’s Mutual Fund asset value grew by 50% in 2020
2020 appears to be the year with the highest growth in the value of mutual fund assets in Nigeria.
While the year 2020 will go down in the annals of history as one of the worst years in the history of mankind, it was not so bad for the Nigerian mutual fund industry.
Interestingly, 2020 appears to be the year with the highest growth in the value of mutual fund assets in Nigeria.
According to data from the Security and Exchange Commission, SEC, the total value of mutual funds in Nigeria stood at N1.042 trillion as at the end of 2019. The same data source now shows that as at the end of 2020, the net asset value, NAV of Nigerian mutual fund had risen to N1.572 trillion, representing an increase of 50.79%.
A deeper analysis of the industry reveals that in 2020, mutual fund contributions amounted to about N0.903 trillion while redemptions amounted to about N0.42 trillion. The same analysis points to the fact that mutual funds gathered an estimated sum of N46.7 billion in gains.
Compared to 2019, the capital activities, comprising of subscriptions and redemptions were slightly far afield. In 2019, subscriptions stood at N0.52 trillion while redemptions came up to N0.14 trillion, resulting in a net inflow of N0.38 trillion. Net inflows for 2020 stands at N0.483 trillion. Unlike in 2019, when mutual funds made an estimated gain of N9.9 billion, the N46.7 billion made in 2020, makes Corona Virus a non-issue for the industry.
Majority of the funds ended 2020 in the black, as 15, out of the 118 mutual funds on the SEC’s NAV Summary Report. The good thing about it is that no particular fund group dominated in making gains.
Although most of the funds that recorded huge gains came from the Euro Dollar category, Bond and Fixed income funds were not left behind as a whole lot of them stood out with mouth-watering gains. Out of nowhere, Stanbic IBTC Nigeria Equity fund sneaked in with some sizable gains too.
On the downside, the two funds that recorded the greatest losses came from the Real Estate Investment fund category. Apparently, the Real Estate Investment Trust funds have not been doing good. Be that as it may, it is laudable that the Nigerian mutual fund industry stood out in 2020.