Two Exchange Traded Funds (ETFs) out of the nine listed on the Nigerian Stock Exchange (NSE) outperformed the market closing 2018 with growth, while the remaining seven declined.
An ETF is an index-based fund that can be bought and sold like shares of stock. It is marketable security that tracks a stock index, a commodity, bonds, or a basket of assets.
ETFs were introduced to the Nigerian stock market to investors as new opportunities to diversify their portfolios and access the market. So there are nine ETFs.
While the NSE All-Share Index fell by 17.8 per cent in 2018, two of the ETFs closed the year with higher value.
The Stanbic IBTC Assets Management Limited (SIAML) Pension ETF 40 recorded a growth of 16.37 per cent, trailed by the Stanbic IBTC ETF 30 Fund recorded a 2.0 per cent growth.
The SIAML Pension ETF 40 is an ETF that mirrors the Pension 40 Index (Pension Index), replicating as closely as possible the total return of The NSE Pension 40 Index.
The Chief Executive Officer, SIAML, Bunmi Dayo-Olagunju had said the primary objective of the SIAML Pension ETF 40 was to provide investors access to the most liquid publicly quoted companies on the NSE that are compliant with the regulatory requirements for investing pension assets in terms of taxable profits, free float, dividend, sector and individual stock weighting.
“The SIAML Pension ETF 40 is designed as an instrument of choice for PFAs, Life Assurance companies, institutional investors, as well as foreign portfolio managers who are desirous of the Nigerian exposure with minimal liquidity and exit risk,” Dayo-Olagunju stated.
Meanwhile, the other seven ETFs closed the year with declines of between 32.2 per cent and 3.1 per cent. However, the Vetiva Industrial Goods ETF led the decline with 36.9 per cent followed by NewGold ETF that fell by 32.2 per cent. Vetiva Consumer Goods ETF shed 20.29 per cent, while Vetiva Griffin 30 ETF went down by 15.78 per cent. Vetiva Banking ETF depreciated by 15.55 per cent, just as Lotus Halal Equity ETF shed 10.84 epr cent. Vetiva S& P Nigerian Sovereign Bond ETF depreciated by 3.10 per cent.
Market analysts said the poor outing by the ETFs reflects the negative performance of the market in 2018, where all the sectoral indicators, which the ETFs track, closed in negative territory.
Speaking on the introduction of ETFs to the Nigerian market, the Chief Executive Officer of the NSE, Mr. Oscar Onyema had said: “Investors now have the ability to quantify and evaluate the trade-offs in our markets, and are able to select the instrument that allows for the most efficient implementation of their desired strategy. There are currently about 506 investors holding ETFs but we are optimistic that the growth of ETFs in Nigeria have only just begun with support of market intermediaries, stakeholders and our regulator.”
He noted that the existence of ETFs in the Nigerian market is beneficial to retail and institutional investors, as ETFs offer a direct and inexpensive way to attain diversified exposure to an index, commodity, sector, or region.
“Asides diversification and tradability, ETFs also offer additional benefits of low expense ratio as compared to mutual funds, increased liquidity and can be used to execute different investment strategies,” he said.