In this first series of “focus on funds,” I will be discussing the Stanbic Absolute Value Fund.
“The investment objective of Stanbic IBTC Absolute Return Fund is to ensure preservation of capital with minimal risk.”
To achieve the above objective, the strategy of the fund is to invest in a “portfolio of securities with zero or no volatility in returns.”
Therefore, 100% of the fund’s assets is expected to be invested in fixed income securities.
Going by the April 2021 edition of the SEC report, the Stanbic IBTC Absolute Value fund held 42% of its assets in money market securities while 58% was held in bonds; an asset allocation that agrees to the fund strategy and objectives.
The expense ratio of the fund as of April 2021 was 0.12%.
Stanbic IBTC Absolute Value fund is one of the funds in Nigeria with consistent positive returns over time. According to the latest fact sheet, the fund generated returns of 6.01%, 14% and 14.17% in 2020, 2019 and 2018 respectively. This comes very close to the returns independently calculated by Quantitative Financial Analytics as presented below.
The difference could largely be because dividends were not factored into the independent calculation. Since April 2014, it has generated a cumulative return of 87.69%.
Fund Vs Index Performance
The fund is indexed against an index that is 70% weighted average of 3 Year Bond and 30% weighted average of Treasury Bill rate. Comparatively, the fund has consistently outperformed the index since its inception.
Volatility and Other Statistics
True to the stated investment strategy, the fund is one of the least volatile funds in the Nigerian mutual fund market. Using standard deviation as a measure of volatility, the fund has a standard deviation of 0.41. It also has an Alpha of 7.16, Sharpe Ratio of 4.79 and Beta and R-Squared of 0.02 and 0.06 respectively. With R-Squared of 0.06, it implies that the fund does not move in tandem with the Nigerian Stock market.
The low volatility of the fund can be seen from its price trend which shows little or no ups and downs.
Risk Return Profile
According to the latest factsheet, the fund has a risk classification of being moderately conservative. However, when risk profiled by Quantitative Financial Analytics, the fund was found to have a risk level of 0.4 with a return of 12.57. That puts the fund in the league of low-risk medium return funds.
Suitability of Fund
Launched in June 2012, the fund is suitable for and aimed at high-net-worth individuals and institutional investors who desire a professionally managed fund.
The initial investment in the fund is N20 million.
What it all boils down to
If you had invested N20 million in this fund in 2014 when it was launched, you would have generated a cumulative gain of 87.69% which translates into N17,538,000. It is not late yet; you can still invest.