There is a dearth of knowledge about the potential of mutual funds, particularly for investors looking to spread risk. What is FBN Capital Asset Management doing about this?
FBN Capital Asset Management is actively promoting knowledge and awareness of mutual fund investing using a number of outlets. For example, we have used social media platforms like Facebook, LinkedIn and Twitter to drive investor education and we regularly produce educational materials, which provide the general public with more information on mutual funds and their benefits.
In addition, members of FBN Capital Asset Management are working closely with the Securities and Exchange Commission (SEC) on the Capital Markets Literacy Initiative, which aims to develop national strategies for financial education.
FMAN aims to raise the profile of Nigerian Fund Managers as well as promote and increase awareness of their expertise in managing segregated investment mandates and mutual funds. One of the key objectives of FMAN over the next two years is establishing a robust fund distribution platform for all SEC registered Fund Managers.
The FBN Heritage Fund has just paid its first dividend to its various unit holders. What motivated this decision?
The Fund performance was affected in 2008, following the global financial crisis where we saw many stock markets, including Nigeria’s, significantly underperform. As a result, the fund was unable to pay a dividend to unit holders during this difficult period.
However, FBN Capital Asset Management has successfully turned around the N5.3 billion FBN Heritage Fund, which returned 28 percent in 2012 and 15 percent year-to-date (YTD) in 2013. As a result of the consistently strong performance that we are experiencing with the fund, we are now able to reward our loyal investors with a N10 per unit dividend.
The fund recorded strong performance in the financial year ended March 31, 2013. As a fund manager, what factors were responsible for this?
Our strong positive returns are a result of our ability to accurately anticipate and respond quickly to changes in the debt and equity markets. The first half of FY13 was characterised by an increased allocation to equities at the expense of our money market exposure, as money market yields were relatively low and we saw opportunities in the equity market. Our overweight position in equities meant the Fund benefited from the strong performance of the Nigerian Stock Exchange (NSE). In addition, discussions around the potential tapering by the US Federal Reserve saw us reduce risk in the Fund and move to safety in the second half of FY13.
We trimmed our equity allocation simultaneously with the 4.3 percent decline in the equity market (as measured by the NSE All Share Index) in June. However, the US Federal Reserve deferred tapering and our risk appetite returned somewhat; we increased our equity allocation to approximately 30 percent in July and we have maintained this position to date.
Coming back to your dividend payment, do we see this trend continuing in the future, considering the array of funds managed by other fund managers?
Investors are showing more interest in income generating mutual funds and so we do anticipate a trend in either existing mutual funds paying a dividend or investment houses launching dividend paying products. As for the FBN Heritage Fund, we hope to award unit holders with a dividend next year, depending on the continued positive performance of the Fund.
For investors looking to build wealth, do you think the FBN Heritage Fund is ideal for them? What are their options?
Yes! The FBN Heritage Fund is an ideal mutual fund for investors looking to build wealth. In fact, all of our mutual funds can help you build wealth. Another option is the FBN Money Market Fund, which provides investors with stability, some income and typically offers higher rates when compared with a standard bank savings account. It is a low-risk mutual fund.
Also, the FBN Fixed Income Fund provides a regular income with exposure to the bond and treasury bills markets. The FBN Heritage Fund provides superior growth for your money by investing across a number of different asset classes. The mutual fund is recommended for customers looking to build wealth through a single diversified fund and offers competitive returns.
The choice of which fund to invest in will be based on the investor’s appetite and objectives, and we provide advice for this. Our mutual funds can help meet savings and wealth building needs, whether that be saving to go on holiday, buy a car or a house, saving for your children’s school fees or even saving towards a stress free and enjoyable retirement!
We already invest on behalf of thousands of Nigerians, both here and abroad, who have entrusted us with helping their money to grow. Our assets under management as of October 31, stand at over N93 billion.
What is your outlook on the performance of the FBN Heritage Fund and your other products, considering a mix of expectations in the year ahead?
Looking to year end, while earnings growth is likely to be lower in FY13, as compared with FY12, we have seen YTD performance of the equity market exceed the FY12 gain of 35 percent. This supports our relatively bearish stance on equities to year-end as we anticipate little upside given performance has not been backed by company fundamentals. We forecast the Central Bank of Nigeria will maintain its hawkish stance with a view to preserving the naira stability. Maturing Treasury Bills and AMCON bonds mean that system liquidity is expected to remain elevated to year-end. We anticipate the CBN will rely on increased open market operation auctions to manage liquidity and we continue to take advantage of these opportunities as they arise. Observable headwinds facing companies support our bearish stance on equities, especially in the context of US tapering, so we see little upside to year-end.