Mutual funds in Nigeria are growing both in number and asset value. Going by the latest NAV Summary Report from the Security and Exchange Commission, (SEC) for the week ending June 19th, 2020, there are 106 mutual funds in Nigeria with a total asset value of N1,337,044,839,679 the equivalent of $3,714,013,444. That is about the most that one can confidently and unequivocally say about Nigerian mutual funds. That underscores the extent of transparency, or lack thereof, in mutual fund reporting in Nigeria. One would expect that an industry that large, one whose net asset value represents 10% of Nigeria’s stock market capitalization, would not be shrouded in any form of opacity.
What is Transparency: The dictionary meaning of transparency is “the state of being easily detected or seen through, easily and readily understood”. When that definition is applied to mutual funds, transparency translates into the ability of the investor to look through his investment portfolio report or fact sheet and be able to see what the investment manager is doing with his money.
Why Transparency in Reporting Matters to the investor: Though mutual fund investors may largely be retail investors with not so much investment knowledge, they would like to monitor their investment performance, the risks involved as well as what their money is being invested in. In addition, investors would like to know how much they pay by way of fees. Transparency makes that information known. To the investor, more transparency translates to more information upon which investment decisions can be made. It also increases the level of comfort that investors have about the fund manager to whom they have given their money to manage.
Why Transparency Matters to the Fund Manager: Even the fund manager stands to gain from transparency in reporting mutual fund activities. Fund managers operate in a competitive market environment and transparency gives them a competitive advantage. A fund manager that discloses information readily, timely, and voluntarily stands to attract investment contributions from investors. It helps to make communication with investors clearer and timely.
Fund Managers Transparency Ranking: Having made known what and why transparency in mutual fund reporting is and should be the norm, I present below a transparency ranking of fund managers based on the availability of requisite information on their website or elsewhere, the frequency and availability of fact sheets as well as the content of such factsheets.
Stanbic IBTC Asset Management Company:
Daily Prices: Stanbic IBTC Asset Management Company has been at the forefront of mutual fund reporting transparency in Nigeria. It has daily fund prices for the 14 funds it manages updated daily on its website and sent to you upon request. Not only are the prices readily available daily, but they are also available on a historical (inception to date) basis.
Factsheets: Prior to 2019, Stanbic IBTC Asset Management Company used to have a monthly fact sheet for each of their funds, but that got changed to a consolidated quarterly report. The quarterly report is released on a timely basis. The beauty of that report is that it tells the investor the risk profile of each fund, the expense ratio, asset allocation by sector, top 3 stock holdings (which is grossly inadequate disclosure) as well as current fund performance juxtaposed with 3- and 5-year performance data. The fact sheet also shows the investor the performance of the benchmark index for each fund. Other information contained in the fact sheet includes fund size, NAV, initial and subsequent investments as well as fund objectives. The Q1 2020 factsheets are currently on the website.
Annual Financial Reports: In addition to the rendition of the fact sheets as noted above, Stanbic IBTC Asset Management publishes the audited financial statements of all the funds under its management. Although that of 2019 has not been published, that of 2018 has been published.
Vetiva Asset Management Company:
Daily Prices: Vetiva Asset Management Company is the second most transparent fund manager in Nigeria. The daily fund prices are readily available although some times it looks like only the dates change without the actual prices changing. This may have to do with the valuation frequency of the funds.
Factsheets: Vetiva Asset Management Company has a monthly factsheet for its funds. The fact sheet contains most of the information that investors require. It beats Stanbic IBTC as it reports the top 10 holdings, which is better than Stanbic’s 3 top holdings. Like Stanbic, Vetiva Asset Management Company reports the risk profile of its funds but not all, and also reports the gross expense ratio. In addition, it lets investors see the funds’ MTD, QTD, YTD, ITD performance in juxtaposition with the relevant benchmarks. The factsheets used to be timely but as at the time of writing, the latest available is for the end of March 2020, it is likely they fund manager may be changing to quarterly reporting like Stanbic IBTC. Other pertinent information on the fact sheet includes dividend history, NAV, Bloomberg identifier, and lots more.
Lotus Capital Asset Management Company:
Daily Prices: Lotus Capital Asset Management comes next in line on transparency in mutual fund reporting. The fund manager publishes daily mutual fund prices but unlike Stanbic and like Vetiva, historical prices are not readily available. In that case, the prices are available on a get it or lose it basis.
Fact Sheets: Lotus Capital Asset Management publishes its factsheets on a quarterly basis and has published Q1 2020 edition for each of its funds. Though it does not show expense ratio, it shows the management and incentive fee percentages as well as a description of the risk profile of the fund. In terms of returns, the factsheet shows the QTD, YTD and ITD returns. It does show 5 top stock holdings as well as asset allocation by sector.
Annual Financial Reports: In addition to the fact sheets being available quarterly, Lotus Capital Asset Management publishes the audited financial statements of all the funds under its management. And the 2019 audited financial statement has been put on the platform.
Quantum Zenith Asset Management Company:
Daily Prices: Quantum Zenith Asset management Company has made a lot of changes to its reporting and by so doing has become one of the most transparent in mutual fund reporting. Daily prices are readily available as well as historical prices in downloadable form.
Factsheets: Quantum Zenith Asset management Company has the funds’ factsheets tucked away on the website The fund manager will be better off making it easier for investors to find the factsheets as its presence is not very evident from the home page. The fact sheet has most of the required information including top 5 holdings. The beauty of the performance presentation is that it shows whether the fund is out or under perfuming the relevant index and by how much. Information on expense ratio is not provided except the management fee rate.
United Capital Asset Management Company:
Daily Prices: United Capital Asset Management Company would probably have ranked the first or second fund manager if not for the lack of daily prices. On its web site, the last daily price is dated June 14th, 2019. However, I have been receiving the weekly prices upon request and investors can too.
Factsheets: United Capital Asset Mgt. Ltd publishes a monthly fact sheet, the latest being for the month of May 2020. The factsheet shows the risk profile of the fund, the total expense ratio, as well as MTD and YTD return numbers put side by side with that of the benchmark in addition to a 5-year performance summary. Unfortunately, it does not contain information on what the funds are invested in but it shows the allocation by asset type.
FSDH is another fund manager that practices or is cognizant of the importance of transparency in fund reporting. The fund manager reports daily prices which can also be downloaded on a historical basis. It also publishes fact sheets. Regrettably, FSDH has been slacking on the timeliness of the fact sheets as the last published ones are for Q4 2019
FCMB Asset Management is yet another reporting transparency conscious fund. The fund manager ensures that the fund prices are on their website daily. They used to let investors have the funds’ fact sheets but that has stopped as the last one posted was for December 2018
Other Fund Managers: There are other fund managers that are transparent with regard to daily fund prices like ARM Asset Management, Afrinvest, Chapelhill, FBN, FCMB, and Meristem but the lack of factsheets pushed them out of contention.
Conclusion: The fund industry has come a long way in Nigeria and it continues to evolve, as the regulators tie all the loose ends and fund managers begin to leverage off of the advantages from transparency, my hope is that mutual fund reporting will improve and the investors will be the happier for it.