Fund managers in Nigeria’s collective investment scheme (CIS) opted to invest a reasonable percentage of equity-based funds under their care in other asset classes outside equities as they searched for higher returns, BusinessDay investigation has shown.
A breakdown of fund managers’ monthly investment schedule for June revealed how they tossed equity-based funds by favouring money market, real estate, and fixed income instruments.
Also known as a ‘stock fund’, an ‘equity-based fund’ is a mutual fund that is meant to be invested principally in stocks.
A detailed look at fund managers’ investment allocation from the 17 equity-based funds under the regulation of the Securities and Exchange Commission (SEC), as recently released by the commission, shows that 74.01 percent of Stanbic IBTC Nigeria Equity Fund was allocated to equities, while 25.17 percent was allocated to money market.
Also, 61.43 percent of ARM Discovery Fund was apportioned to equities, 6.32 percent to fixed income, 16.73 percent to money market, 5.84 percent to real estate, while 9.68 percent was held as cash.
Fund managers of Coral Growth Fund allocated only 46.55 percent to equities, while they doled out 11.30 percent to fixed income, and 42.16 percent to money market. In addition, only 32.60 percent of Nigeria International Growth Fund was allocated to equities, 41.56 percent went to money market, 24.41 percent to real estate, while 1.39 percent went to fixed income.
Amid this trend, weak corporate earnings have constrained stock price increases as investors and fund managers rotate their portfolios away from equities.
Analysts at Financial Derivatives Company Limited said recently that weak corporate earnings affected investor sentiment in favour of equities, adding that “corporate earnings increased by 6.14 percent and share price has declined by -0.28 percent”.
A further look at fund managers’ investment schedule for the month of June revealed that fund managers of Legacy Fund allocated 80.50 percent to equities, while 13.45 percent was placed in money market.
Only 40.85 percent of IMB Energy Master Fund went to equities in the review month, while the fund’s managers allocated 57.82 percent to money market. For the Frontier Fund, only 54.42 percent of the fund was apportioned to equities, while 42.22 percent went to money market.
The fund managers of Paramount Equity Fund allocated 83.60 percent of the fund to equities, while 13.89 percent went to money market. In addition, 54.93 percent of UBA Equity Fund was allocated to equities, 23.81 percent to money market, while they held 21.26 percent as cash.
For ARM Aggressive Growth Fund, its managers allocated 86.65 percent to equities, 1.40 percent to fixed income, while 6.31 percent went to money market.
Looking at ACAP Canary Growth Fund, its fund managers allocated only 39.94 percent to equities, 36.75 percent went to money market, 18.11 percent to real estate instruments, while 0.57 percent of the fund was allocated to other asset classes.
For Anchor Fund, its fund managers assigned paltry 26.04 percent of the fund to equities, and 73.19 percent to money market. Fund managers of Bedrock Fund allocated 92.55 percent of the fund to equities, while only 7.26 percent went to money market.
A look at Zenith Equity Fund shows that 56.64 percent of the fund was allocated to equities, 39.06 percent of the fund was invested in money market, while 4.31 percent was left as cash. Also, 68.97 percent of Afrinvest Equity Fund was invested in equities, 22.13 percent in money market, while the fund managers held 8.90 percent of the fund as cash.
Equally, 49.86 percent of BGL Nubian Fund was invested in equities, 21.70 percent in money market, while the fund managers held 28.43 percent as cash. Fund managers of SIM Capital Alliance Fund invested on 30.36 percent of the fund in equities, 8.59 percent in fixed income, 26.03 percent in money market, 23.26 percent in other asset classes, while they held 11.76 percent as cash.
In their market review, analysts at UBA Capital said, “The Nigerian financial markets witnessed a flurry of headwinds in H1’2014 with the equity market up marginally by 2.8 percent as at the end June; while bond yields declined on average by 180 basis points (bps) across all maturities.”
This was recorded in the face of a continued pull back in US quantitative easing and the attendant portfolio reversals.
“Demand in the fixed income market was mixed in H1:2014. Although demand was weak at the start of the year, activities picked up towards Q2, pushing yields down on average by 1.89 percent in H1:2014. Liquidity level in the market was high in H1:2014 as shown by the 82.06 percent over-subscription of OMO auctions, as the CBN conducted OMO auction of N1.47 trillion in total in H1:2014 in an attempt to mop-up excess liquidity,” said UBA Capital analysts, adding that NSE-ASI returned 2.79 percent in H1:2014 (28.80 percent in H1:2013).
“Major drags in the market were the suspension of the ex-CBN governor, the MPC’s aggressive monetary tightening which triggered sell-offs in banking stocks, with a bandwagon effect on other sectors,” they said.
Iheanyi Nwachukwu
