Market Report

Investors book over N270mn loss on depleting Exchange Traded Funds

by Iheanyi Nwachukwu

November 24, 2016 | 2:44 am
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Fund managers of Exchange Traded Funds (ETFs) in Nigeria are caught in the web of “what best stocks/commodities to place these funds” as some unit holders of these ETFs are seen booking losses and resorting to declining dividend payouts. Exchange-Traded Funds are Collective Investment Schemes (CIS) that tracks the performance of an index, or a commodity. ETFs trade like shares on a Stock Exchange and derive value from the index or commodity they tracks.

Seven SEC regulated Exchange Traded Funds are: Lotus Halal Equity ETF; The Vetiva Griffin 30 ETF; NewGold ETF – Exchange Traded Funds; Vetiva Banking ETF; Vetiva Consumer Goods ETF; Vetiva Industrial ETF; and Stanbic IBTC ETF 30 Fund. The nine-week (September 9 –November 11) volatility measure of these ETFs at the Securities and Exchange Commission (SEC) revealed how their unit holders are carrying value loss of about N277million.

For instance, the ETFs market capitalisation declined from record highs of N4.223billion to N3.946billion in the review period nine weeks period. Analysts say while expected growth in dividend payouts by ETFs slowed in recent quarters, it did not stop ETF investors from continuing to pile into the exchange-traded funds connected with one of the most-popular trading strategies in recent years.

“The ETF industry is expanding, with competition intensifying as new providers enter the market. Pressure to invest in technology and compliance is making the ability to achieve scale increasingly difficult. Integrating innovation throughout the business to address these challenges is crucial to ensuring that providers can meet an ever-growing range of customer needs and attract an ever-wider range of investors,” said Lisa Kealy, E&Y EMEIA ETF Leader.

With investments across major markets across the globe, ETF investors are adjusting to Donald Trump’s presidential election win and trying to determine how his new administration’s policies will affect their money decisions and strategies.

“Dividend increases more than outweigh the cuts, but dividend growth has slowed. Dividends remain one of the few alternatives available to income-seeking investors”, Howard Silverblatt, senior index analyst at S&P Dow Jones Indices said in a recent statement.

ETFs provide investors the opportunity to diversify their portfolios without going through the rigours of selecting individual securities. For example, when you buy an ETF that tracks the Nigerian Stock Exchange (NSE) 30 Index, it gives you ownership of a portfolio of shares of all the securities listed in the NSE 30 Index.

Some of them offer investors access to other markets such the Standard & Poor’s 500 (S&P 500), the Financial Times Stock Exchange 100 Index (FTSE), and Johannesburg Stock Exchange (JSE) while offering diversification, access to non-traditional asset classes and hedging tools. The Lotus Capital-managed Halal Equity Exchange Traded Fund “LHE ETF”, an open-ended fund which is intended to track the performance of the NSE-Lotus Islamic Index (NSE-LII) has declined in value by N131.7million from N555.446million to N423.678 million. Its unit price declined from N8.93 to N8.79 in the nine weeks review period. 

The Lotus Halal Equity Exchange Traded Fund is designed to enable investors obtain market exposure to the securities of the constituent companies of the NSE-LII and to replicate the price and yield performance of the index.

“While market volatility has made many investors nervous, there are a few investment vehicles that have continued to grow. ETFs are subject to standard downside market risks as well as individual risks specific to the content of each ETF. To mitigate general downside risks, investors can hold Inverse ETFs. These produce the opposite return of the underlying asset,” research analysts at Financial Derivative Company said in their report “Deepening the Nigerian Capital Market – A Case for Exchange Traded Funds”.

The New Gold ETF value steadied at N598.500million while its Unit Price remained at N3, 990. The ABSA Capital managed NewGold Exchange Traded Fund (ETF) offers the opportunity to invest in gold bullion as it tracks the Rand price of gold. Within the nine-week period to November 11, the value of Vetiva Griffin 30 ETF “VG 30 ETF”, an open-ended Exchange Traded Fund managed by Vetiva Fund Managers Limited declined from N1.885billion to N1.794billion, a decline of about N91million.  Its unit price also decreased from N12.62 to N12.01. The VG 30 ETF is designed to track the performance of the constituent companies of the NSE 30 Index and to replicate the price and yield performance of the Index.

The Vetiva Banking ETF, an open-ended Exchange Traded Fund managed by Vetiva Fund Managers Limited lost about N11.7million from N104.687million to N92.974million. The fund’s unit price decreased from N2.86 to N2.54.

The VETBANK ETF was designed to track the performance of the constituent companies of the NSE BANKING Index and to replicate the price and yield performance of the Index. The NSE BANKING Index comprises of the top 10 banks listed on the Nigerian Stock Exchange in terms of market capitalisation and liquidity and is a price index weighted by adjusted market capitalisation.

Also in value terms, the Stanbic IBTC ETF 30 Fund lost about N34.707million while its unit price decreased from N81 to N78.19. From a high of N913.647million, the asset value of this ETF which was designed to track the performance of the NSE 30 index declined to N878.941million. 

The Vetiva Consumer ETF “VETGOODS ETF”, also an open-ended Exchange Traded Fund managed by Vetiva Fund Managers Limited recorded a nine-week value decrease of about N585, 000.

The net asset value of the VETGOODS ETF, designed to track the performance of the constituent companies of the NSE Consumer Goods Index and to replicate the price and yield performance of the Index decreased from N84.995million as at September 9 to N84.410million as at November 11.

The fund’s unit price decreased from N7.27 to N7.22 in the review period. The NSE Consumer Goods Index which the VETGOODS ETF tracks comprises of the top 15 companies in the Food/Beverages and Tobacco sector listed on the Nigerian Stock Exchange in terms of market capitalisation and liquidity.

The Vetiva Capital managed Vetiva Industrial ETF, an open-ended Exchange lost about N7.09million in nine weeks to November 11. 

The Unit Price of this ETF which was designed to track the performance of the constituent companies of the NSE Industrial Index declined to N16.43 from N18.02 as at September 9. Its market capitalisation declined from N80.396million to N73.302million.

Iheanyi Nwachukwu


by Iheanyi Nwachukwu

November 24, 2016 | 2:44 am
12893  |   93   |   0  |   Start Conversation

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