Vetiva Chief Investment Officer expects continued market volatility

With the expectation of continued market volatility, Vetiva Fund Managers limited has advised that investors continue to keep in mind their long term investment objectives (which takes into consideration individual investment horizons and risk appetites) and review these objectives on a periodic basis.

“We believe that putting this natural part of investing into perspective can help moderate anxiety and reassert the consistency of a long term investment strategy”, Oyelade Eigbe, head, investments said.

In its January 2016 notes from investment desk, the firm highlighted the recurring theme of 2015 being Crude Oil and its impact on Nigeria’s macro-economy. It noted that the NSE All-share Index has steadily declined in the last year and a half now, losing 44 percent from the post-2008 market crisis high on 9th July 2014 (23,916.15 vs. 43,039.42), on the back of the continuous decline in oil prices.

The firm’s views for the equities market remain hinged on the performance of crude oil prices and, so far, the 2016 performance has proved this right as the NSE ASI opened the year to severe sell pressure (when oil prices hit 13 year lows) and later witnessed intermittent positive momentums towards the mid-end of the month following sustained uptick in oil price.

The unimpressive macro-variables had its effects on the Fixed Income investment space, as the firm witnessed a gradual-but-steady rise in yield in the month of January 2016, with investors adjusting for expected increase in Debt Management Office (DMO) supply and market uncertainty. However, the money market space remained largely flat, driven mainly by the CBN’s accommodative monetary stance which was further reiterated at its January Monetary Policy Committee (MPC) sitting.

‘Hence, we are of the opinion that as long as we see lower oil prices for longer and we continue to witness market volatility, investors will continue to question the strategies/tactical actions to be taken as well as the options available. It therefore goes without saying that we will continue to maintain a cautious approach to investing in 2016 with focus on capital preservation”, Eigbe said.

The Fund Manager’s r allocation to the equities market, which seeks to find an optimum structure that manages the Portfolio Risk, remains conservative with an allocation of 55 percent, 35 percent and 10 percent to Aggressive, Balanced and Conservative Portfolios respectively. Investments in equities will focus on fundamentals and high dividend yield blue chip stocks, as earnings season for full year 2015 slowly approaches.

According to the firm, to militate against portfolio losses, provide portfolio liquidity and diversify the portfolio, the fixed income and money market allocations will be geared towards the short-end of the yield curve and investments in quality money market instruments.

 

HOPE MOSES-ASHIKE