PAC Asset Management was recently recognized as a leading investment house in Nigeria. In this interview with TELIAT SULE and CHIJIOKE ONYEOGUBALU, the company’s MD/CEO, Dele Ige identifies the company’s selling points that led to its success in 2020 as well as the outlook for 2021 and beyond. Excerpts:
Give us a brief background about yourself and PAC Asset Management Limited
My name is Dele Ige and currently, I am the Managing Director/CEO of PAC Asset Management Limited. I joined the company when it was in its infancy in 2011 and rose through the ranks. I trained as an Accountant, and I am an Associate Member of the Institute of Chartered Accountants of Nigeria. I have operated in the investment management space for more than 15 years.
PAC Asset Management Limited (“PAC Asset”) is licensed by the Securities & Exchange Commission (“SEC”) as a funds/portfolio manager. PAC Asset is a subsidiary of Pan African Capital Holdings Limited, a proprietary investment company with an interest in finance, hospitality, information and communication technology, agriculture, and real estate. PAC Asset has floated and presently manages 5 collective investment schemes including PACAM Balanced Fund, PACAM Money Market Fund, PACAM Fixed Income Fund, PACAM Equity Fund, and PACAM Eurobond Fund. In addition, we provide portfolio management services to HNIs and institutional clients. Chris Oshiafi chairs the board, ably supported by messrs Sina Alimi, Eric Okoruwa, and my humble self. The board members with a combined experience of over 100 years have varying transaction experiences in investment banking, corporate and consumer banking, risk management, fixed income trading, equities research & funds, and portfolio management.
What led the group to branch out and start the asset management company?
Our group forayed into the asset management business as an outcome of the market crisis of 2008. At that time, only a few specialized asset managers were operating in the market. The investment approach was rather unsophisticated for most participants depending mainly on news of what to buy or sell – a herd approach, which ultimately led to the market crisis.
Our group saw the prospects for a better-organized investment approach in the form of an asset management firm and took on the challenge by floating its own asset management firm – PAC Asset Management Limited. Our mandate is to provide innovative investment products across a wide spectrum of the market covering retail, High Net Worth Individuals (HNIs), and institutional segments. To cover this spectrum, we currently manage 5 mutual funds and provide wealth/portfolio management services with bespoke services/products to HNIs and institutional clients.
Read Also: PAC Asset Management wins 2021 Global Banking and Finance Awards
What has been the success level of the asset management side when compared with targets that have been previously set?
A target is a benchmark of what is achievable and provides a direction to any team. At PAC Asset Management we have from time to time achieved or exceeded our set benchmarks in terms of product innovation and growth. For instance, the performance of our mutual fund products is measured against pre-set benchmarks which we have often met or surpassed. For example, in 2020 the PACAM Equity Fund not only surpassed the benchmark but was rated as the best performing mutual fund in the equity category by Global Banking & Finance Awards and Business AM Awards. Also, our PACAM Eurobond Funds and our other funds have consistently performed well. We recently received the “Asset Management Firm of the Year – Nigeria 2021” award from Pan Finance. We are confident to maintain this winning trend in future years.
Can we get to know more about your funds under management?
Currently, PAC Asset Management manages five collective investment schemes or mutual funds as popularly called. Each fund has a different risk profile, target investor types, objectives, and asset allocation which are indicative of their names. I will now describe each fund
PACAM Equity Fund is a pure equity fund that invests your money predominantly in a portfolio of NSE-quoted companies, using a rigorous research-based system. The fund provides long-term capital preservation by investing at least 70% of the fund’s assets in a diversified portfolio of high-quality companies listed on the Nigerian Stock Exchange. The fund also invests up to 30% in short-term money market instruments. The asset allocation of the PACAM Equity is Quoted Equities – 70-80%, Fixed Income & Money Market Instruments – 17-30%, and cash 0-3%.
The PACAM Eurobond Fund is a US dollar-denominated open-ended unit trust scheme that invests in US dollar debt instruments issued by the Nigerian government and reputable corporate institutions. The Fund seeks to provide access to investors with a bias for dollar-denominated securities at thresholds that ordinarily would be inaccessible to them by virtue of the minimum investment threshold. The objective of the Fund is to provide steady income in foreign-denominated currency and capital appreciation. The fund allocation consists of sovereign, supranational, and corporate bond 70-100%, Money Market Instruments 0-30%, cash 0-5%.
The PACAM Balanced Fund gives exposure to equities, money markets, bonds, and real estate instruments. This fund is designed to take the best advantage of a wide array of markets. The asset allocation of this fund consists of equities 40-60% and fixed income & money market instruments 40-60% as well.
PACAM Fixed Income Fund invests in sovereign, corporate and subnational bonds. The underlying instruments are long-tenured, although a portion of the fund portfolio is invested in a short-term instrument for the sake of liquidity management. The dividend is paid annually. The fund portfolio is allocated as follows bond & other debt instruments – 70-90% and other fixed income securities 10-30%, cash 0-5%.
PACAM Money Market Fund provides exposure to money market instruments such as treasury bills, commercial papers, and placement. All instruments have a maximum of 1-year tenor and income distribution is made every quarter. The asset allocation of the money market fund consists of short-term government securities – 25-100%, bank placement – 0-30%, and other money market instruments 10-70%.
What are the benefits of investing in a mutual fund?
Some of the benefits of mutual funds include professional management, economies of scale, portfolio diversification, and low investment threshold. So let me explain each of these benefits.
Professional management: Mutual funds are managed by investment professionals who have the requisite skills and experience. These managers also rely on the research capability of their institutions to make investment decisions for the benefit of mutual fund subscribers.
Economies of scale: Mutual funds trade in larger volumes than most retail investors can afford. Such large volumes confer benefits such as lower transaction costs and better terms. It allows investors to access markets where minimum thresholds are out of reach of the ordinary retail investor.
Portfolio diversification: Although mutual funds operate pre-set allocation ratios, it allows subscribers to gain exposure to the different asset classes within each fund or by investing across different funds.
Low investment threshold: The investment threshold of our mutual funds is low to allow for the participation of many retail investors. For instance, some of our funds accept minimum investments as low as ₦5,000. For our PACAM Eurobond Fund, you can start investing at as low as US$1,000.
Low transaction cost: Management fees and other costs of operating mutual funds are highly regulated, hence, the bulk of investment gains accrue to unitholders either as income distribution or capital gains.
In 2019, you introduced two new funds to the market, how are they doing in the market presently?
Yes, we introduced two mutual funds in 2019, PACAM Equity Fund and PACAM Eurobond Fund. They both serve different needs as their names imply. The Eurobond fund for instance serves as a hedge against inflation and currency fluctuations while the equity fund is designed to provide investors with capital appreciation as well as investment cashflows. Both funds have performed well since inception.
The PACAM Equity Fund has returned more than 60% on net asset value since inception – in simple terms, an investor who invested N1 million when the fund opened in 2019 should have a net asset value of more than N1.6m today. Likewise, the PACAM Eurobond Fund has returned more than 11% since its inception in 2019. Again, an investor in the fund will have more than US$11,000 today for $10,000 invested in 2019. As already noted, the PACAM Equity Fund won two awards as one of the best equity funds in Nigeria for the year 2020. In essence, we can conclusively say that both funds have performed well thus far.
On the equity side, what are the assets you look out for, considering you must be selective because of the volatility of the market?
This question temptingly requires one to provide a list of securities that one would consider for investment on the equities side. Rather, I would prefer to provide selection criteria for securities that we would consider for inclusion in any of our portfolios. Some of the criteria we consider when selecting securities include financial performance, dividend payment history, industry leadership position, board and management, macro & microeconomic factors. We adopt both top-down and bottom-up approaches to securities selection. I will stop there to avoid boring you out.
What are the macro challenges facing the asset management business?
Inflation, GDP growth rate, and exchange rate are factors that affect the industry. High inflation in a low yield environment is a major challenge that asset managers must surmount. Weak GDP growth results in lower investible income and investors’ confidence while exchange rate challenges bring about uncertainty in real domestic returns.
Recently, PAC Asset Management won the 2021 global banking and finance award, please tell us about this?
Indeed, PACAM Equity Fund was recognized as one of the top-performing equity funds in Nigeria for the year 2020. In the equity funds category, PACAM Equity Fund performed better than every other mutual fund in the country and that was largely due to our excellent investment philosophy, good decision-making process, and proactive positioning in the market.
What kind of government reforms do you see attracting foreign investors back into the Nigerian market?
The Nigerian market is highly desirable to foreign investors because of the size of the domestic market, population, natural resources, agricultural potential, and economic liberalization policies of the government. However, several factors impede FDI flows into the economy, for instance, Security concerns arising from terrorism and kidnapping among others, inefficient judicial and dispute resolution system, underdeveloped transport and energy infrastructure, and heavy tax burden.
Reforms around these areas of weaknesses will aptly support FDI flows into Nigeria. Such reforms should include reforms in the transport, infrastructure, power, and judicial sectors. Some of the important reforms to consider will include simplification of the land acquisition system, reform/updating of mortgage laws by the states, opening up of critical sectors such as rail. And of course, the implementation of the Petroleum Industry Act, just to mention a few.
Why should people invest with PAC Asset Management Limited?
Our professionalism and customized services are one thing to brag about. Our people are among the best in the industry. Also, our funds have also reported good performance which we believe we can sustain. We are constantly innovating new investment products to cater to our clients’ needs – you will always find a product or service that meets your needs.
What is your outlook for the future?
PAC Asset Management will develop its franchise into a leading African investment service provider marshaling capital for the development of critical sectors of the Nigerian economy and African regions.
