Investors renewed interest in less risky stocks and the need for market exposure in equities are among factors responsible for the current asset managers’aggressive introduction of Exchange Traded Products (ETP), BusinessDay investigations have shown.
Consequently, the high liquidity nature of the equities ensures steady returns for the unit holders.
An exchange traded fund (ETF) or exchange traded products are investment funds traded on stock exchanges, much like stocks.
Depending on the objective of the fund manager in designing the exchange traded fund, an ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day.
Noticeably rising in the Nigerian capital space are Exchange Traded Funds (ETFs) that are particularly designed to enable unit holders have market exposure in equities traded at the Nigerian Stock Exchange.
For instance, in the first-quarter (Q1) of 2014 Vetiva Fund Managers Limited entered the ETF space with Vetiva Griffin 30 ETF, which is an open-ended fund designed to enable unit holders obtain market exposure to the securities of the constituent companies of the NSE 30 Index and to replicate the price and yield performance of the Index.
Also, by September, Stanbic IBTC, through its Asset Management subsidiary, will be entering the Initial Public Offering (IPO) market to raise N1billion by issuing 10milllion units of its ETF-30 value at N100 each at par.
Stanbic IBTC ETF 30 entry into the market by next month will add to the existing number of ETFs at the stock market; which include NewGold ETF, Lotus Halal Equity ETF, and Vetiva Griffin 30 Exchange Traded Fund.
In less than four years when the Nigerian ETF market recorded its first entrant, the market value has grown to N3.209billion or 0.0178 % of the N13.8trillion total market capitalisation of the Nigerian Stock Exchange, as at August 6, 2014.
The entrance next month, of Stanbic IBTC ETF 30 will increase the value of the ETF market to over N4billion.
As many investors expect high returns from a highly volatile stock market, ETF are designed to redress investors perception against their traditional manner of investing directly in various equities at the stock market.
By holding a portfolio of securities on behalf of unit holders that substantially represent all of the component securities of the NSE 30 Index, the funds “30” policy is not far from replicating, as far as practicable, the price and yield performance of the NSE 30 Index.
Vetiva Capital Limited, in collaboration with ABSA Capital, a South African investment banking firm, introduced the first ETF, the NewGold ETF in December 2011. Vetiva Griffin 30 Exchange Traded Fund (VG30 ETF) which tracks the price and yield performance of the NSE 30 was launched in March 2014.
Also to enable investors benefit from the historical superior performance of the NSE Lotus Islamic Index (NSELII), Lotus Capital created the Lotus Halal Equity ETF (LHE ETF) to track the performance of the NSE LII.
Iheanyi Nwachukwu
