The 7 Nigerian mutual funds that ‘beat the market’ in 2017

by | January 8, 2018 2:05 am

Seven out of the ten equity based funds outperformed the Nigerian Stock Exchange (NSE) in 2017 as passive investors continues to sweat their cash by giving it to fund managers to invest for them.

Available data from the Nigerian Securities & Exchange Commission (SEC) indicates that the Legacy Equity fund delivered 58 percent returns on investment in 2017, 16 percent above the NSE’s 42.3 percent.
This is followed by ARM Aggressive Growth Fund, which delivered returns of 55 percent, 13 percent higher than the NSE’s 42.3 percent.
Third on the list is FBN Nigeria Smart Beta Equity Fund, which returned 53 percent, 11 percent higher than the NSE’s 42.3 percent.
Stanbic IBTC Aggressive Fund (Sub Fund), Meristem Equity Market Fund, AXA Mansard Equity Income Fund, United Capital Equity Fund, retuned 49 percent, 47 percent, 46 perxcent and 46 percent, beating the NSE’s 42 percent.

On the other hand, Paramout Equity Fund, Stanbic IBTC Nigerian Equity Fund and Frontier Fund, underperformed the Index as they returned 34 percent, 28 percent, and 21 percent respectively.
Total Asset under Management of Mutual Fund (AUM|) of funds in Nigeria topped N400 billion for the first time.
According to Quantitative Financial Analytics, in a November report, over 67 percent of these funds are invested in money market fund, 11.33 percent in Real Estate Funds, and 8.33 percent in fixed income funds while 7.40 percent are in Equity Based Funds.
However, we could see a turn of events as the yield curve has been falling since mid-2016. In short, yields on treasury bills that were between 21 percent and 23 percent in April 2016 have fallen to around 8 and 12 percent as at end of 2017.
What’s more, Federal Government plans to pay domestic debt could see yields fall in 2018, paving the way for investment in equities.
Some experts are of the view that investment in fixed income funds will remain attractive and higher as investors are risk averse and they rather prefer to clutch on a safer investment with minimal risk.
Of the 58 mutual funds, representing 86.57 per cent of the mutual funds registered with SEC as at the week ended October 27 2017, only 5.97 per cent of the mutual funds provide information on fund’s expense ratio (funds expenses as a proportion of their value), according to a report by the November 2017 report by BusinessDay Research & Intelligence Unit (BRIU).

The only fund managers that provide information on expense ratio are Vetiva Fund Managers Ltd’s (DV Balanced Fund) and Investment One Funds Managers Ltd (Vantage Guaranteed Income Fund, Vantage Balanced Fund, and Abacus Money Market Fund), according to the report.

The expense ratio tells us whether investors are getting value for the fees they pay to fund managers.

In other words, good managers is should justify the fees collected from clients by minimizing risk and maximizing returns.