BusinessDay analysis of 14 equity funds in Nigeria between January 8 and December 24th, 2021 shows Legacy Equity Fund, Stanbic IBTC Aggressive Fund (Sub Fund) and ARM Aggressive Growth Fund topped the gainers’ chart last year, as analyzed from data by the Securities and Exchange Commission (SEC).
Also known as stock funds, an equity fund is a type of mutual fund that invests principally in shares or stocks of companies. A mutual fund is an investment vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, money market instruments and other assets.
Managed by First City Asset Management Limited, Legacy Equity Fund reported the most increase in its unit price in 2021. With an 11.54 percent jump in its unit price, the fund added N0.18 to settle at N1.74 at the end of last year from N1.56 reported at the beginning of the year.
The unit price reported by Stanbic IBTC Aggressive Fund (Sub Fund) earned it the second spot on the top gainers’ list. Managed by Stanbic IBTC Asset Mgt. Limited, the fund grew its unit price by N252.58 to N2,815.07 in December, an increase of 8.97 percent from the N2,562.49 recorded at the beginning of the year.
“From a portfolio perspective, it means they delivered positive gains last year,” Ayorinde Akinloye, a research analyst at Lagos-based CSL Stockbrokers, said.
With a 7.99 percent jump in its unit price in the review period, ARM Aggressive Growth Fund that is managed by Asset & Resources Mgt. Co. Ltd secured the top three list to end 2021 with a unit price of N20.53 from the N19.01 it reported at the beginning of last year.
The three equity-based funds outperformed the 6.7 percent return reported by the Nigerian equities market in 2021.
The Lagos Bourse ended the year 2021 with an impressive positive return of 6.7 percent amid a remarkable rally on Friday, December 31 (+2.16percent) or N471billion. Last-minute bargains on the Nigerian Exchange helped the value of listed stocks to rise by N1.23trillion in 2021.
Lizzie Kings-Wali, Chief Executive Officer of Blackstone Capital Limited; “2021 was a roller-coaster year for equities, with eight months of positive returns and four-month of the bearish season.”.
With the market closing the year with a 6.7percent gain, consolidating on the strong recovery in stock prices in 2020, “the sentiment for Nigerian equities is increasing upbeat.”
Further analysis of SEC data for the review period showed that Meristem Equity Market Fund and Stanbic IBTC Nigerian Equity Fund were among the top five performers as their unit prices increased by 5.82 percent and 5.80percent, respectively.
Accounting for 44.44 percent of the total N15.54 billion asset managed by the entire equity funds listed on the Exchange, Stanbic IBTC Nigerian Equity Fund grew its unit price from N10,532.99 at the beginning of the year to N11,144.13 at the end of last year. Its assets expanded by 4.54 percent to N6.91 billion from N6.61 billion in the first week of January 2021.
Managed by Meristem Wealth Management Limited, Meristem Equity Market Fund added N0.64 to its unit price to end the year with N11.63 from N10.99.
Other equity-based funds that recorded positive return in the review period include Vantage Equity Income Fund (5.69%) Paramount Equity Fund (4.17%), Anchoria Asset Management Limited (3.76%), United Capital Equity Fund (3.3%) and AXA Mansard Equity Income Fund (0.79%).
The least performing funds in the review period were PACAM Equity Fund (-8.28%), FBN Nigeria Smart Beta Equity Fund (-3.95%), Frontier Fund (-3.88%) and Afrinvest Equity Fund (-0.04%).
Equity-based funds recorded one of the highest increases in net asset value between January 8 and December 24, the period covered by the latest data by the Securities Exchange.
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Analysis of the SEC data showed that in the 12 months ended December 2021, the money market mutual fund which invests mostly in instruments like the government less-risky Treasury Bills reported a net asset value decline of N183.20 billion. Fixed-income investors redirected their assets away from the short-term instrument largely due to its relatively low yield.
After crashing to a four-year low of near-zero percent in 2020, yields on the Federal Government risk-free Treasury bill jumped to more than 17 months-high of 9.75 percent on May 14. The rate, however, plunged to an 11-month low of 4.9 percent at the last auction of 2021, as compiled from Nigerian treasury bills primary market auction results for December 29, 2021.
Investors’ interest in T-bills and consequently, the lower interest rate, has been largely due to their unwillingness to take a risk on longer-term instruments due to the expectation of higher interest rates in 2022, according to Akinloye.
“As a result, most investors are piling cash in short term assets like T-Bills until the coast is clear on yield direction,” the Lagos-based analyst said.
Analysis of the T-Bills auction result for 2021 revealed that the real return investors earned from the short-term instrument at the end of 2021 was almost the same as the return they earned at the beginning of the year. While the inflation-adjusted return for the 364-day T-bill stood at -10.5 percent at the end of December, the rate was -10.63 percent in January.
The inflation rate was however different in the review period. As of January 2021, Nigeria’s inflation rate stood at 12.13 percent but slowed for eight successive months to 15.40 percent in November after rising at a faster pace for 19 consecutive months to March 2021.
The high inflation rate reported in November 2021 compared to the beginning of the year and the decline in the T-bill rates are the reasons the real return remained in the negative, according to market analysts.
Going into 2022, Akinloye said, “we should see stability and consequent reversal of T-bill rate from 4.9 percent level.”
Further analysis of the T-bill auction result for 2021 showed that while interest rates on the 91-day and 182-day bills were mostly constant at about 2.49 percent and 3.45 percent, respectively in the review year, the longer 364-day reported the most decline, ending the year at 4.9 percent.
Breakdown of the last T-bill auction result for 2021 revealed more than N29.48 billion worth of failed transactions were recorded at the Nigerian Treasury Bills (T-Bills) auction conducted last Wednesday by the Central Bank of Nigeria (CBN) on behalf of the Federal Government of Nigeria (FGN) as investors bid at rates as high as 5.25 percent 6.7 percent and 6.99 percent on the 91-day, 182-day and 364-day bills.
Subsequently, the apex bank lowered rates across the three tenors to 2.49 percent 3.45 percent 4.9 percent respectively.
Investors jostled for the N52.76 billion the CBN raised at the auction with N82.25 billion, almost two times oversubscribed.
Like other auctions in 2021, investors’ appetite for the longer 364-day bill was higher than the 91-day and 182-day bills.
The CBN sold N2.49 billion worth of bills for the 91-day paper, N2.16 billion worth of bills were allotted on the N182-day paper, while bills valued at N48.11 billion were sold on the 364-day paper.
While the 364-day bill with a higher interest rate was oversubscribed by N27.88 billion the shorter 91-day and 282-day bills were oversubscribed by a combined N1.61 billion.
The CBN planned to raise N4.61 billion for the shorter 91-day bill but investors said they were willing to subscribe with N2.71 billion. The apex bank eventually issued N 2.49 billion, N2.12 billion less than the CBN’s initial offer.
Investors were willing to bid with N 3.47 billion for the N2.16 billion raised for the 182-day bill, N1.31 billion more than what the CBN raised. The amount raised by the apex bank, however, was lower than its initial offer of N3.31 billion by N1.15 billion.
While the CBN offered to raise N44.84 billion through the longer 364-day Treasury bill, investors said they were willing to invest more with N 75.99 billion. The apex bank later raised N48.11 billion. The apex bank issued N3.27 billion worth of more bills.
