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Funds Management

How risky is your Mutual Fund?

As an investor, it is not out of place to understand the role that risk plays in managing your funds and as an ingredient to investment.



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In my several years of analyzing and writing on Nigerian mutual funds, many questions that I have been asked bothers mostly on mutual fund performances or returns. No one has ever asked me about mutual fund risks, as if the risk is not of any importance to them.

Risk is one of the things that should concern you as an investor. Risk is an ingredient of every type of investment. As an investor, you cannot totally run away from it but you can manage it through diversification, by selecting and mixing your portfolio up with assets of varying risks and correlations.

READ: Nigeria’s Micro Pension industry: A gold mine waiting to be tapped

Risk management starts with an understanding of what risk is and how to measure it. It also needs an understanding and a self-analysis of an investor, with a view to knowing the investors’ risk tolerance or appetite.

Different investors have different appetite or tolerance for risk. The amount of risk each investor is willing to take in order to achieve a given return is his risk tolerance. Conservative investors opt for low-risk investments, the downside of which is that they have to live with low returns too, while aggressive investors go for high risk-high return investment types.

READ: What will you invest N1 million in if you have the following options?

What is Risk?

According to the dictionary, “Risk is a situation involving exposure to danger or harm”. However, when the word risk is used with respect to mutual funds or stocks, it implies volatility.

Volatility on the other hand, is the fluctuations in the unit prices of mutual funds or stocks. The greater that volatility, the greater the risk. Mutual fund risks are indicated with historical volatility.

READ: Nigeria’s Pension Asset increased by N228 billion in October

How do investors measure risk?

There are many measures of mutual fund risk, but the most basic is standard deviation. When standard deviation is calculated with respect to a mutual fund, it is calculated as a measure of the extent to which the actual performance of the mutual fund in question has deviated from the average performance.

READ: The pros and cons of Pension Fund Administrator transfer

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How Mutual Fund Standard Deviation should be used


Investors use and should use standard deviation to rank mutual funds’ risk with a view to uncovering which fund aligns with the investor’s risk appetite and tolerance. Though mutual funds can be ranked in accordance with their risk as indicated by their standard deviations, there are other risk-adjusted measures that can help an investor to sift between mutual funds in the selection process.

READ: United Capital Asset Management explains mutual funds’ positive performance

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Here are some of them:

  • Sharpe Ratio: Sharpe ratio is a risk-adjusted statistic that tells an investor if the returns a mutual fund made over a period of time is commensurate with the risk exhibited by that mutual fund over the same time period. A fund with a higher Sharpe ratio should be more preferable to one with a lower Sharpe ratio.
  • Alpha: It is another measure of mutual fund risk-adjusted performance. Alpha is a measure of the extent to which a mutual fund performs better than a given but suitable market index. Using the Nigeria All Share index as an example, a mutual fund with an Alpha measure of 1% implies that the fund outperformed the ASI by 1%. Alpha helps to know if a fund performance is due to manager’s asset allocation skills or due to luck. It is therefore a fund manager selection tool as well.
  • Beta: Beta is a measure of the volatility of a mutual fund in relation to the volatility of a given but suitable market index. A higher beta indicates that the mutual fund has more volatility and therefore more risk than the index in question. Beta is calculated by conducting a regression analysis of mutual fund returns versus index returns over a period of time.
  • R-Squared: It is a statistic that measures what percentage of movement in or returns from a mutual fund that can be attributed to movements in the overall market index. A fund with an R-Squared of .9 indicates a high correlation with the market and that 90% of the returns from the fund can be explained by events in the overall market. R-Squared therefore, helps to uncover how a fund manager’s asset allocation ability benefits a mutual fund. It could be useful in not only fund selection but also in manager selection.

READ: Insurance giant, MassMutual buys $100 million worth of Bitcoin

I have intentionally belaboured you with all the above seemingly boring piece of this article, so you will understand the basis for my selection of the 5 low-risk mutual funds in Nigeria with positive Alpha. This analysis is based on the NAV Summary Report from January 2010 to November 6th 2020.

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READ: Mutual Fund Reporting: A call for standardization

Here they are:

.Source: Quantitative Financial Analytics
  • Stanbic IBTC Bond Fund: This is currently the fund with the lowest risk. According to Quantitative Financial Analytics, Stanbic IBTC Bond fund has a standard deviation of 0.15, an Alpha of 2.09 and a Sharpe ratio of 4.15.
  • Stanbic IBTC Absolute Fund: This is the second-lowest risk mutual fund in Nigeria. It has a standard deviation of 0.18, an Alpha of 1.81, and a Sharpe ratio of 2.83
  • Legacy Short Maturity Fund: This is the third-lowest risk mutual fund in Nigeria. This fund has a standard deviation of 0.2, an Alpha of 2.08, and a Sharpe ratio of 2.78
  • Stanbic IBTC Guaranteed Fund: This is the fourth-lowest risk mutual fund in Nigeria going by its standard deviation of 0.22, an Alpha of 2.96, and Sharpe ratio of 4.03
  • Coral Income Fund: This is the fifth-lowest risk mutual fund in Nigeria as indicated by its standard deviation of 0.43, an Alpha of 0.38, and a Sharpe ratio of 0.25

Bottom line

Note that this ranking is solely driven by the standard deviation as a measure of risk. However, the ranking changes when done on a risk-adjusted basis of Sharpe Ratio. I will do a piece on risk-adjusted ranking in my next article.


Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. and (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.

1 Comment

1 Comment

  1. Ade

    November 30, 2020 at 10:29 am

    Good and precise info.

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Funds Management

Nigeria’s pension asset under management hits N12.3trillion in December 2020

Nigeria’s pension asset under management hits N12.3trillion in December 2020.



PenCom, unremitted pensions, Lagos State Pension Commission, LASPEC, Pension Fund Assets, PFAs make N1.69 trillion ROI  

Nigeria’s pension asset under management, as of December 2020, stands at N12.3trillion which represents a modest growth of 20% year-on-year and 0.003% month-on-month (no significant change), according to the monthly report by National Pension Commission (Pencom).

According to the report, total RSA funds increased by 20% year-on-year while the funds under both existing schemes and Closed Pension Fund Administrator (CPFA) as well, grew by 21% year-on-year.

Other Key highlights

  • As of December 2019, investments in FGN Securities accounted for 72% of the total pensions assets fund, out of which 73% was invested in Bonds and 26% in Treasury Bills.
  • As of December 2020, investments in FGN Securities accounted for 66% of the total pensions assets fund, out of which 84% was invested in Bonds and a paltry 8% in Treasury Bills, which is not unrelated to the subsisting very low yield of TB in the money market.
  • The investments in FG Bonds represent 56% of the total pension assets fund under management. The renewed and increased investments in FG Bonds can be attributed to the attractiveness of the yields of FG bonds over the Treasury Bills.
  • RSA Fund II and III accounted for 89% of the total RSA funds and 69% of the total pension assets under management as of December 2020, while others – Funds I, IV and V accounted for 31%
  • All the RSA funds, including existing scheme and CPFA recorded year-on-year growth as follows: Existing scheme (13%), CPFA(28%), Fund I (49%), Fund II(19%), Fund III(21%), Fund IV(18%).
  • As of December 2020, only N80.54million was invested under the newest RSA fund (Fund V) – specifically created for micro pensions.

What you should know

There are 4 pension fund types, with the newest recently introduced for the micro pension scheme.

The Multi-Fund structure is a framework that aims to align the age and risk profile of RSA holders, as follows:

  • Fund I – This is an optional fund. Contributors must write formally to opt for this Fund.
  • Fund II – This is the default fund for contributors aged 49 and below.
  • Fund III – This is the default fund for contributors aged 50 and above.
  • Fund IV – This is the Retiree Fund.

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Best performing Mutual Funds in January 2021

According to data from the SEC, 49.2% of the 118 registered funds recorded positive growth in January 2021



Best Mutual Funds in Nigeria

Mutual funds are one of the fastest-growing asset classes in Nigeria, as data from the Security and Exchange Commission (SEC), shows that 49.2% of the 118 registered funds recorded positive growth in January 2021.

A mutual fund is a type of financial vehicle made up of a pool of money collected from various investors, with the aim of investing them in securities like stocks, bonds, money market instruments, and other assets.

According to SEC, a total of 118 mutual funds were registered as of January 29, 2021, with a net asset value of N1.57 trillion across several fund types.

Nairametrics tracked the performance of these mutual funds by comparing the fund prices as of 31st December, 2020 with the fund prices as of the last trading day of January 2021.

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

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Lotus Capital Halal ETF – Lotus Capital Limited (Exchange Traded Fund)

The Lotus Halal Equity Exchange Traded Fund “LHE ETF” is an open-ended fund that tracks the performance of the NSE-Lotus Islamic Index (NSELII). It is designed to enable investors obtain market exposure to the securities of the constituent companies of the NSE-Lotus Islamic Index and to replicate the price and yield performance of the index.

December 31st, 2020

Fund Price – N12.73

January 29th, 2021

Fund Price – N13.66

Return – 7.31%

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Ranking – Fifth


Commentary: This is an Exchange Traded Fund by Lotus Capital Limited, which grew by 7.31% in the month of January. The fund also grew significantly by 51.7% in the year 2020, indicating that the fund is a delight to its investors. Also, the net asset value stood at N655.04 million as of 29th January, 2021, indicating 6.76% growth compared to N613.59 million recorded as of 31st December, 2020.

READ: Understanding how Mutual Funds and ETFs work in Nigeria

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Stanbic IBTC Aggressive Fund – Stanbic IBTC Asset Mgt. Limited (Equity Based Funds)

The Stanbic IBTC Aggressive Fund (SIAF), which was launched in June 2012, is an open-ended fund that invests a minimum of 60% of its portfolio in equities of companies listed on the Nigerian Stock Exchange (NSE) and a maximum of 40% in fixed income securities. Notably, the expense ratio for the fund is 1.5%.

December 31st, 2020

Fund Price – N2,525.55

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January 29th, 2021

Fund Price – N2,713.93

Return – 7.46%

Ranking – Fourth


Commentary: Stanbic IBTC Aggressive Fund is the second-best performing Equity-Based fund in the month of January, growing by 7.46% to stand at N2,713.93 as of 29th of January, 2021. The net asset value also grew by 7.43% to close at N340.8 million.

READ: DV Balanced Fund to become a Money Market Fund

FSDH Dollar Fund – FSDH Asset Management Ltd. (Fixed Income Funds)

This is an open-ended mutual fund that invests in US Dollar denominated Fixed Income Securities issued by Nigerian Sovereign and Corporate Entities. The objective of the fund is to provide customers with the opportunity to invest in dollar-denominated instruments. Meanwhile, the minimum amount required to invest in the fund is $1,000.

December 31st, 2020

Fund Price – N415.1

January 29th, 2021

Fund Price – N447.7

Return – 7.85%

Ranking – Third

Commentary: The fixed income fund managed by FSDH Asset Management, recorded growth of 7.85% in January from N415.1 recorded as of the end of 2020 to stand at N447.7 at the end of January. The net asset value grew by 18.41% to close at N1.002 billion.

Paramount Equity Fund – Chapel Hill Denham Mgt. Limited (Equity-based Fund)

Paramount Equity Fund is Nigeria’s oldest mutual fund, which invests in a broad range of high-quality equities and fixed income securities. The fund aims to provide an investment vehicle that will enable unit holders to achieve consistent capital appreciation over a medium-to-long term.

December 31st, 2020

Fund Price – N16.27

January 29th, 2021

Fund Price – N17.56

Return – 7.93%

Ranking – Second

Commentary: This is an Equity Based Fund managed by Chapel Hill Denham Management, which grew by 7.93% in the month of January 2021 to stand at N17.56 as of 29th of January 2021, while the net asset value grew by 8.22% to stand at N598.19 million.

Vantage Dollar Fund – Investment One Funds Management (Fixed Income Fund)

Vantage Dollar Fund is an open-ended Unit Trust Scheme by Investment One Funds. The Fund seeks to provide investors with a bias for Dollar denominated securities an access to such securities, which ordinarily would be inaccessible to them by virtue of the minimum amount typically required to make such investments.

December 31st, 2020

Fund Price – N559.87

January 29th, 2021

Fund Price – N502.9

Return – 11.33%

Ranking – First

Commentary: This is the best performing mutual fund in the month of January 2021 and the only fund with a double-figure yield in the month under review. Vantage Dollar Fund grew by 11.33% to stand at N502.9 as of 29th of January 2021 while the net asset value also grew by 10.93%. This is quite an impressive performance as the fund primarily invests in Corporate and Sovereign Eurobonds.


Bubbling under……

The following funds make up the rest of the top 10 our list in ascending order:

AXA Mansard Equity Income Fund – AXA Mansard Investments Limited (Equity Based Fund)

Return – 6.69%

VETBANK ETF – Vetiva Fund Managers Limited (Exchange Traded Fund)

Return – 6.82%

PACAM Equity Fund – PAC Asset Management Limited (Equity Based Fund)

Return – 6.86%

Legacy Equity Fund – First City Asset Management (Equity Based Fund)

Return – 7.14%

VCG ETF – Vetiva Fund Managers Limited (Exchange Traded Fund)

Return – 7.16%

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