- ETFs Beneficial to Retail, Institutional Investors
The existence of Exchange Traded Funds in the country’s financial market is beneficial to retail and institutional investors, the Chief Executive Officer, the Nigerian Stock Exchange, Oscar Onyema, has said.
He said the ETFs offered a direct and inexpensive way to attain diversified exposure to an index, commodity, sector, or region, adding that aside from diversification, they also offer additional benefits of low expense ratio as compared to mutual funds, increased liquidity and could be used to execute different investment strategies.
As part of the Exchange’s efforts to develop the ETF market, he said the needed awareness was being created, while addressing its challenges and promoting its opportunities in Nigeria and Africa.
Onyema said this at the annual ETFs workshop hosted by the NSE in Lagos.
According to him, the history of the ETFs dated back to 1990, when the Toronto Index Participation Fund (TIP 35) was launched in Canada. Since then, the ETFs have gained widespread acceptance in most developed markets with demand from global retail and institutional investors leading to a variety of offerings by the ETF sponsors.
“The ETFs have become a huge success story, as global ETF assets under management had grown from $1.4tn in December 2010 to about $3tn as of April, 2016, representing over 102 per cent cumulative growth over the last five years. Experts have predicted the continued growth of the ETF industry estimating that global AUM will reach at least $7tn by 2021,” he said.
In the NSE, the ETFs were introduced in December 2011 with cross listing of Newgold ETF with the AUM of N287.5m to provide investors’ with new opportunities to diversify their portfolios and access the market.
Onyema said, “As of today, we’ve recorded about 1,900 per cent growth in our ETF market with total AUM of about N4.24bn as at September 2016 on eight ETFs currently listed and traded on the Exchange – Newgold ETF, Vetiva Griffin 30 ETF, StanbicIBTC ETF 30, Lotus Halal Equity ETF, Vetiva Sector Series ETFs- Banking, Consumer Goods and Industrial, and Vetiva S&P Nigerian Sovereign Bond ETF (six equity backed, one commodity ETF and one bond ETF).
“Investors now have the ability to quantify and evaluate the trade-offs in our markets, and are able to select the instrument that allows for the most efficient implementation of their desired strategy. There are currently about 506 investors holding the ETFs but we are optimistic that the growth of the ETFs in Nigeria has only just begun with support of market intermediaries, stakeholders and our regulator.”