|
Getting your Trinity Audio player ready...
|
The latest Net Asset Value (NAV) data obtained from the website of the Nigerian Securities and Exchange Commission (SEC) showed that the total value of assets under management for Nigerian ethical funds stood at N4.7 billion as at December 2, 2016 as the funds suffered 8-week decline of 3 per cent as at that date.
An ethical fund is a mutual fund for which the asset managers make investment decisions based on some ethical guidelines, often targeted at investors who may have moral objections to certain asset classes or companies.
The SEC information showed that 5 ethical funds are currently registered by the regulators.
Lotus Halal Investment Fund (LHIF), valued at N2.1 billion, is the largest Nigerian ethical fund controlling 44 per cent of the ethical funds sector of the Nigerian funds industry. The fund charges quarterly incentive-based management fees.
A fund manager with Lotus Capital who spoke to BusinessDay said that they charge 30 per cent of the money earned on the fund in each quarter; they do not charge any management fees for any quarter with zero or negative returns.
Lotus capital is the firm that manages the LHIF, which posted a total return of 2.25 per cent in 2015, according to the latest (publicly) available financial statements.
Stanbic IBTC Asset Managers Limited, Managers of the Stanbic IBTC Ethical Fund (SIEF), the second largest ethical fund by NAV, charges 0.63 per cent of the fund’s NAV as management fees. This is the lowest non-incentive-based management fees charged by any ethical fund.
Data obtained from Bloomberg on February 9, 2016, showed that the SIEF posted a year-to-date loss of 2.60 per cent. SIEF makes up 36 per cent of the ethical fund sector. Information on the fees charged by managers for their second ethical fund, the Stanbic IBTC Imaan Fund (SIMAAN) was not available.
Information from the website of the managers says that SIMAAN invests a minimum of 70 percent of its assets in equities of companies listed on The Nigerian Stock Exchange, which comply with the requirements of the Shariah as it retains a maximum of 30 percent in non-interest earning fixed income securities (i.e. Sukuk). SIMAAN was registered with SEC in 2013.
Making up 13 per cent of the ethical funds sector, Zenith Ethical Fund is managed by Zenith Asset Management Limited, a subsidiary of Zenith Bank Plc. The prospectus that issued the fund to the investors in 2008 said that the managers may charge fees of up to 1.5 per cent of the fund’s NAV.
The ARM Ethical Fund (AREF) makes up 4 per cent of the ethical funds sector of the Nigerian mutual funds industry. Managed by ARM Investment Managers, the AREF has applicable management fees of 1.50 per cent, with a negative year-to-date return of 2.82 per cent.
A 2015 study carried out about the US mutual fund industry showed that managers with performance-linked bonuses exhibit superior subsequent fund performance.
“In contrast, alternative compensation arrangements, such as fixed salary, assets-based pay, or advisor-profits-based pay are not associated with superior performance.”
The report also concluded that the compensation structure of portfolio managers also affects fund risk-taking.
INNOCENT UNAH
