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Funds Management

Mutual Fund Reporting: A call for standardization

Nigerian Mutual Funds do not make their financial reports public.

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Mutual Funds, Mutual Fund gone bad: Nigerian investor discloses his 10 years investment that nosedived , Nigeria’s mutual fund asset value reaches N1 Trillion

One of the banes of mutual funds in Nigeria is the lack of proper reporting. In some cases, the reports are either not available at all, or lacking in timeliness. Most importantly, when available, the reports lack uniformity.  This lack of uniformity makes it difficult for investors to compare among mutual funds.

Why Mutual fund reports are important: The importance of timely and standardized mutual fund reporting to investors cannot be overemphasized. Mutual fund reports are a means by which fund managers provide periodic information to their investors. Such reports act as a vehicle by which financial and other relevant information is provided or communicated to shareholders. The reports allow investors the ability to make better-informed investment decisions. It allows investors to compare among funds prior to and/or during investing.

What should be disclosed; Because there are many information relating to mutual funds, not all of them call for disclosure but the most important ones should be disclosed with respect to each fund in a way that makes it easy for investors to find and understand. Here are the important things that should be disclosed in a standardized form:

READ MORE: Nigeria’s mutual funds generate over N529billion in new investments in 2019

Fund Fees: One important consideration for a mutual fund investor is the expenses that he or she has to bear by investing in a mutual fund. Mutual funds typically disclose information about their fees in their prospectus; however, it is important that those fees also be disclosed in the monthly reports and fact sheets to remind and keep investors abreast of the fees. Some funds do this, as at the moment, but many do not either issue fact sheets or do not disclose fees in them.

Portfolio Position Holdings: Mutual funds invest in other securities and investors should be made to know what their funds are invested in. Unfortunately, most mutual funds in Nigeria do not disclose this information. At best, they show the industry or sector classifications of what they invest in. Though it may not be easy to disclose all the holdings, especially with a large fund, but fund managers should be able and required to disclose any investment that is more than a given percentage of the fund’s net asset value, like 10%. At the barest minimum, fund managers should be required to disclose the largest 10 investments in the fund.

READ ALSO: Understanding Mutual Fund Fees: Incentive or Performance Fee

Disclosure of position holdings helps investors to know the extent to which they are exposed to concentration risk, the extent of diversification in a fund, and the extent of correlation between funds, for investors investing in multiple funds. In other words, disclosing position holdings will enable investors to know the extent to which their funds overlap and also form the basis of making informed asset allocation decisions. A disclosure of position holdings will help investors know when a fund manager engages in style drift, an indication of when a fund manager deviates from the investment objectives of a fund. When fund managers disclose position holdings, it places investors in a better position to evaluate the fund’s risk profile and investment strategy.

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Sigma Pensions

Fund Performance: Even though past performance does not guarantee future performance, fund managers should disclose fund performance in a consistent and similar manner in their reports. Such reports should show month to date, quarter to date as well as year to date returns. It should even show inception to date returns, and if possible, shown as a cluster of monthly returns. This will help investors know whether a fund manager is consistent in his/her performance or if the fund performs well in up markets or in down markets or in both.

Structure of Reports: It is not only the information that requires disclosure that should be standardized, the structure of the reports should be as well. A situation where one fund shows the performance of the fund on the first page and another fund hides it as a fine print, does not make comparison easy.  Therefore, funds should locate similar information on the same spot across fund reports so that investors can easily find them in one report based on their experience with another report.

Conclusion: Mutual funds in Nigeria have come a long way and they have come to stay. It is time for the regulators of mutual funds to come up with guidelines on reporting standards and frequencies in order to make understanding and using of such reports easy for investors. By so doing, there will be a level playing field for all funds. As it stands, the regulation of mutual funds in Nigeria seem to be lacking in certain areas. Such standardization, while increasing investors’ understanding will also help in getting more prospective investors interested in the mutual fund industry, and invariably lead to the growth of the industry.

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.

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Exclusives

Best performing Mutual Funds in February 2021

Nairametrics reviews the best Mutual Funds in the month of February 2021, judging by their performance.

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Best Mutual Funds in Nigeria

Data obtained from the Security and Exchange Commission (SEC), showed that only 25 mutual funds out of the 118 registered funds in the month of February recorded price gains in the period.

Mutual funds have always been considered as a good alternative investment opportunity, particularly for retail investors because it gives them access to diversified and professionally managed portfolios at a low price.

After delivering an impressive growth of 51.6% in 2020 and kicking off 2021 with a marginal decline of 0.13% in January, the total net asset value of the registered mutual funds also declined further by 0.94% between January and February 2021.

According to SEC, the total net asset value of the 118 registered mutual funds in Nigeria was N1.56 trillion across the 9 mutual fund types offered as of February 26, 2021.

READ: Top 5 Fund Managers in Nigeria by asset value

A comparison of the performance of the fund types month-on-month indicated that despite the fall in total net asset value at the end of February, real estate bonds’ net asset value grew by 17.48%, exchange traded bonds by +11.72%, fixed income funds by +5.27% while the bond funds grew by +1.26%. The infrastructure bonds sustained their value in January, recording no change in the month. Other funds recorded losses with the money market fund recording the highest loss of 7.09% in net asset value during the month.

It is also worthy of note that out of the 118 registered mutual funds, only 32 mutual funds had increased in net asset value between January and February 2021 while only 25 mutual funds had increased in unit price.

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

READ: Nigeria’s mutual fund asset value hits N1 Trillion


FBNQuest Asset Management Limited – Retail (Bond Funds)


The FBN Nigeria Eurobond is a fixed income mutual fund that invests in the US Dollar-denominated debt instruments issued by the Nigerian government and reputable corporate institutions. Investments can be made into this fund by both retail and institutional investors.

To get started as a retail investor, a minimum investment of $2,500 is required and the minimum holding period is 180 days.

January 29, 2021

Stanbic 728 x 90

Fund Price – N49,736.31

February 26, 2021

Fund Price – N51,765.35

Return – 4.08%

Ranking – Fifth

Commentary: The retail bond fund package of FBNQuest Asset Management Limited performed as the fifth-best fund in February 2021. The unit price appreciated by 4.08%, closely behind the growth of the institutional bond fund managed by the same asset manager.

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The net asset value of the fund increased by 7.81% from N4.62 billion as of 29th January 2020, to N4.98 billion as at end of February 2021.

READ: Naira falls across forex markets as CBN suggests official rate has been adjusted


FBNQuest Asset Management Limited – Institutional (Bond Funds)

The FBN Nigeria Eurobond (USD) designed for institutional investors is also invested in US Dollar-denominated debt instruments issued by the Nigerian government and reputable corporate institutions and managed by FBNQuest Asset Management Limited.

To begin investment as an institutional investor, a minimum of $100,000 is required for a minimum tenor of 180 days.

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January 29, 2021

Fund Price – N49,681.06

February 26, 2021

Fund Price – N51,712.01

Return – 4.09%

Ranking – Fourth

Commentary: The FBNQuest Asset Management Limited bond funds created for institutional investors is the fourth in the list best performing fund in the month of February, growing its unit price by 4.09% and net asset value by 4.41% from N578.37 million in January 2021 to N603.85 million in February 2021.

READ: Investors pump N7 billions into New Gold ETF


Nova Dollar Fixed Income Fund (Fixed Income Fund) – Novambl Asset Management

Nova USD Fixed income fund is an actively managed open-ended unit trust scheme managed by Novambl Asset Management. The fund has an asset allocation range target of 0% – 80% on sovereign Eurobonds, 0% – 80% on corporate Eurobonds, 0% – 50% on money market instruments and finally 0% – 5% on Cash.

The issue price is $100 per unit and the minimum initial investment for the offer is 5 units of the funds, while additional/subsequent investments will be issued in multiples of 5 units and payable in full, upon subscription.

January 29, 2021

Fund Price – N393.57

February 26, 2021

Fund Price – N410.23

Return – 4.23%

Ranking – Third

Commentary: Nova dollar fixed-income fund, managed by Novambl Asset Management Ltd, recorded unit price appreciation of 4.23% from N393.57 in January 2021 to N410.23 in February 2021. The fund’s net asset value also increased by 4.17% from N122.95 million as of 29th January 2021 to N128.08 million at end of February 2021.


United Capital Euro Bond Fund – United Capital Asset Management Limited (Bond Funds)

The United Capital Nigerian Eurobond Fund is an open-ended mutual fund that invests in dollar-denominated euro bonds, floated by the Federal Government of Nigeria, Nigerian top-tier banks, and corporates.

Investors can start with a minimum of 10 units, with each unit costing $100 and multiples of 5 units can be purchased thereafter.

January 29, 2021

Fund Price – N46,347.64

February 26, 2021

Fund Price – N48,466.73

Return – 4.57%

Ranking – Second

Commentary: The euro bond fund owned by United Capital Asset Management Ltd recorded a unit price growth of 4.57% in February 2021. The net asset value however declined by 3.61% from N29.74 billion as of 29th January 2021, to N28.67 billion at the end of February 2021.


Stanbic IBTC Dollar Fund – Stanbic IBTC Asset Management Limited (Fixed Income Funds)

Stanbic IBTC Dollar Fund (SIDF) is an open-ended fund launched in January 2017. The fund invests a minimum of 70% of its portfolio in high-quality Eurobonds, a maximum of 25% in short-term USD deposits, and a maximum of 10% in USD equities.

The expense ratio of the fund is 1.5%. The minimum investment amount is $1,000 while additional investments is $500. All investments must be held for a minimum period of 180 days.

January 29, 2021

Fund Price – N485.29

February 26, 2021

Fund Price – N507.73

Return – 4.62%

Ranking – First

Commentary: This is a dollar fund by Stanbic IBTC Asset Management Limited, which led the list of best-performing mutual funds in the month, appreciating by 4.62% in February.

Also, the net asset value as of 26th February 2021, was N119.23 billion indicating a growth of 3.50% when compared to N115.20 billion recorded as of January 29 2021.


Bubbling under…..

The following are the other top 10 performing funds on our lists in ascending order:

Lotus Capital Fixed Income Fund – Lotus Capital Limited (Fixed Income Fund)

Return – 0.68%

Anchoria Equity Fund – Anchoria Asset Management Limited (Equity-Based Funds)

Return – 0.77%

SFS Fixed Income Fund – SFS Capital Nigeria Limited (Fixed Income Funds)

Return – 1.00%

Cordros Dollar Fund – Cordros Asset Management Limited (Fixed Income Funds)

Return – 1.51%

ARM Discovery Balanced Fund – Asset & Resources Management Company Limited (Mixed Funds)

Return – 1.58%

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Funds Management

Best Pension Funds in Nigeria for the month of February 2021

Nigerian Pension Fund administrators in the month of February across the different funds dipped significantly in February 2021

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This is why you should make voluntary contributions to your pension fund, The Pension Transfer Window – Who holds the Joker?

The performance of most Nigerian Pension Fund administrators in the month of February across the different funds dipped significantly as only 22% of the funds recorded positive growth in the month.

  • This is according to data tracked by Nairalytics Research on the fund performance released on the websites of the PFAs.
  • The overall downturn in the review month came on the back of the significant positive performances churned out in the previous year, despite the effects of the pandemic on the global economy.

Nairametrics considered the prices of the different RSA funds as of 31st January 2021 and compared them with the prices as of the last day of February (28th February 2021).

READ: Pension Fund Administrators in Nigeria and their scorecard


Below is a list of the best-performing funds in February 2021;

RSA Fund I

This fund has the highest allocation of risky or variable income instruments and participation is strictly upon a formal request from a contributor. The RSA Fund I is suitable for persons who want to invest in high-risk instruments with higher rewards.  Hence, contributors who are 50 years and above cannot apply to be moved into this fund.

According to available data, only Stanbic IBTC Pension Manager Limited recorded positive growth in the month of February 2021, growing by 0.5% to close at N1.7223.

Name of PFA: Stanbic IBTC Pension Managers

  • February return: 0.5%

It is worth noting that, the information of Investment one Pension Managers was not available on their website, while that of NLPC Pension Fund Administrators and Pensions Alliance Limited could not be computed. Other administrators in this category recorded a decline in the review month.

READ: PenCom discontinues Employee Death Benefit Account  

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Sigma Pensions

RSA Fund II

This fund is balanced and suitable for middle-aged contributors as well as those with a medium risk appetite. It is designed to be less risky with reduced allocation to variable income instruments compared to Fund I. The age requirement for participation is 49 years and below.

First Position: Nigerian University Pension Management

  • February return: 0.4%

Second Position:  Fidelity Pension Managers Limited

  • February return: 0.2%

Third Position: Radix Pension Fund Managers Limited

  • February return: 0.03%

As was the case with the RSA Fund I, Information on Investment One Pension Managers could not be obtained from the website, while NLPC and Pensions Alliance Limited could not be computed. Others on the list recorded a decline in February 2021.

Stanbic 728 x 90

READ: Pension asset increases to N9.33 trillion – PenCom


RSA Fund III

This is a conservative fund that is designed for contributors close to retirement and contributors with a low-risk appetite. It is suited for contributors between the ages of 50 and 60 years. However, younger contributors may opt to participate in this fund category.

First Position: Leadway Pensure PFA Limited

  • February return: 1.3%

Second Position: First Guarantee Pension Limited

  • February return: 0.4%

Third Position: Nigerian University Pension Management Company

  • February return: 0.3%

READ: PenCom moves to deepen pension fund investment participation

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RSA Fund IV

The RSA Fund IV is exclusively for retirees. In the month of February, of all 22 Pension Fund Administrators, 10 of them recorded positive growth. However, they were all marginal growth of less than 1%.

First Position: Leadway Pensure PFA Limited

  • February return: 0.8%

Second Position: Veritas Glanvills Pensions Limited

  • February return: 0.5%

Third Position: AXA Mansard Pension Limited

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  • February return: 0.5%

A cursory look at the Q4 2020 Pension industry report shows that the total value of Pension Fund assets was N12.31 trillion as of 31st December 2020, comprising of N8.51 trillion for the RSA active funds, N962.66 billion for the RSA Retiree fund, N1.56 trillion for the CPFAs, and N1.27 trillion for the approved existing schemes.

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