• Friday, March 29, 2024
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BusinessDay

Investors to get 4-6% returns on new Cordros dollar mutual funds

Cordos

Investors in the new Cordros dollar mutual funds will get as much as 6 percent returns on their investments on an annual basis.

The new dollar mutual funds which was officially launched recently after approval from the Securities and Exchange Commission (SEC), has a fund size of $2 million, that would allow participating investors hedge against currency risk amid speculations of a likely devaluation.

Investors subscribing to the funds within the offer period of Monday, 25th November 2019 – Friday, 27th, December 2019, would be coming in at an investible amount of $100 per unit for a least subscription of five units or $500 while subsequent subscribers would pay a higher amount on the same minimum subscription unit.

The dollar fund is an open-ended one,

meaning investors can continuously add new subscription to their already subscribed units. It also has a minimum holding period of 180 days and an early redemption fee of 1.50 percent, paid at T+5 (five business days after an investor decides on pulling investment out of the fund

The launching of the fund came at a time when speculations around a possible devaluation is growing in the heart of investors who say the naira is overvalued at its current exchange of N360 to the dollar.

“Our survey when dealing with clients have shown that there is strong demand for foreign currency denominated product to enable them hedge against devaluation while getting returns on their funds,” said Wale Agbeyangi, Group Managing Director, Cordros Capital. “Hence, the need to come up with the product to enable them to diversify their portfolio.

Since the start of the year, Nigeria’s foreign reserve which portfolio investors view as a shock absorber used to weather the storm from external volatility, has declined by over $5 billion to $39.6 as at Friday, 6th Dec, according to CBN data, thereby taking investors’ mind back to a 2016 scenario when a naira devaluation followed by spiralling inflation, wiped off totally their investments.

Godwin Emefiele, Governor of the CBN, last month, said he sees “no devaluation insight”, but he can only adjust the exchange rate if oil price trades below $50 and the external reserve falls below $30 billion.

Cordros says it will spread allocations of the funds across three asset classes with sovereign Eurobonds taking the larger share of 50 percent, Corporate Eurobonds to get 30 percent allocation and money market about 20 percent.

According to Agbeyangi, the reason for the “mutual funds” was to give retail investors, those having as low as $1000, an opportunity to key into the dollar-denominated securities.

The abridged prospectus of the fund seen by BusinessDay shows SLT Trustees Limited as trustee to the fund; Stanbic IBTC Bank Plc as custodian to the fund; Babalakin & Co as Solicitors to the trustee; Moore Stephens RoseWater as reporting accountants; First Registrars and Investors Services Limited as registrars and PKF Professional Services as auditors to the fund.