• Friday, June 21, 2024
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Fund managers sell off assets to meet client obligations


Some fund managers in the Nigerian capital market are placing their assets for sale to meet the liquidity obligations arising from their clients newest decisions to trim down market risks.

An informed market source told BusinessDay at the weekend, that the option to sell assets results from the urge to leverage the medium-term window given to them by market regulators to fulfill their obligations to their clients.

“You will recall what happened in this market over the past months. A lot of investors exited the market and put us under pressure to meet their obligations as a result of their decisions to sell-off their securities.

“After several consultations with clients and our meeting with the regulator, we have decided to sell our assets to meet the obligation,” the source said.

Some of these investors who were major players in the collective investment space had late last year, taken flight to safety, out of Nigeria’s stock market, as low oil prices and FX concerns created monetary and fiscal challenges in Africa’s biggest economy.

Looking at the net asset value of collective investment schemes regulated by the Securities and Exchange Commission (SEC) where most Fund Managers allocate pooled fund from their clients, it shows about N4.5billion in cumulative loss to N279.5billion as at June 17 compared to June 10 level at N275.03billion.

Money market fund lost N4.4million; fixed income fund lost N235million;  equity-based fund appreciated by N500million; bond funds value rallied by N11 million; real estate fund rose by N3million; mixed fund rose by N500million; ethical funds gained N75million; while Exchange Traded Fund recorded N163million in value increase.    

Mostly affected, are market operators whose clientele are foreign institutional investors. From a record high of N1.539trillion in 2014, foreign portfolio investment (outflow and inflow) in the Nigerian Stock Exchange reduced to N1.025trillion in 2015 – these include equity sales or liquidation and purchase transactions of portfolio investments and through the stock market.

Following global concerns over Brexit, amid speculative profit-booking, the Nigerian stock market is nearing its year-open level, even as investors await H1’16 results.

“Closing positions across most traded stocks and tepid market indicators suggest that market sentiment remains weak. That said, we expect the market to open to cautious trades in the week ahead,” research analysts at Lagos-based Vetiva Capital said, Friday.

From a record return of minus 13 percent in the four months to April 2016, the newly introduced flexible foreign exchange (FX) policy stimulated overall stock market sentiment and helped push the bourse return to record highs of 8.48%. As at Friday, the year-to-date return stood lower again at 0.74%.

Research analysts expect the current bearish sentiment in the equities market to be sustained as the euphoria around the liberalised FX market wanes.