Exchange Traded Funds Gain N1.34b in One Year

  • Exchange Traded Funds Gain N1.34b in One Year

Exchange Traded Funds (ETFs) listed on the Nigerian Stock Exchange (NSE) recorded average gain of 20.2 per cent, equivalent to net capital gain of more than N1.3 billion in the past one year. Seven of the nine ETFs recorded double-digit gain over the 12-month period, with gains between 13 per cent and 72 per cent.

A Market Intelligence showed that the net asset value (NAV) of quoted ETFs rose from N5.78 billion on June 23, last year, to close at N7.12 billion last June 22, representing an increase of 23.17 per cent or N1.34 billion.

While the increase in value could sometimes be due to increase in units due to supplementary issuance, unit-price analysis further confirmed that the increase in value was due largely to capital gain. Unit-price analysis of ETFs data supplied by the Securities and Exchange Commission (SEC) showed average gain of 20.22 per cent during the period, three percentage points below the value-based change.

ETF is a security that tracks the performance of a specified security or other assets, including stocks, basket of assets, indices, commodity prices, foreign currency rates, and derivatives among others. There are many types of ETF. Index-based ETF, like index fund, tracks specified market index.

ETFs are essentially index funds that are listed and traded on the Exchange like shares. Buying and selling ETFs is as simple as buying and selling of shares. Unlike shares and mutual funds however, the ETFs will trade continuously all day long and allow investors to lock in a price for the underlying stocks immediately, rather than being bought and sold based on end-of-day prices.

ETFs were introduced at the NSE in December 2011 with cross listing of New Gold ETF with asset under management (AUM) of N287.5 million. The New Gold ETF is a gold-based derivative which allows Nigerian investors to invest directly in gold.

Two ETFs being managed by Stanbic IBTC Asset Management Limited (SIAML) led the return table. The Stanbic IBTC ETF 30 Fund recorded the highest gain of 71.64 per cent while the SIAML ETF 40 followed with a gain of 57.32 per cent. Vetiva Fund Managers’s VETBank ETF placed third with a gain of 23.08 per cent. Lotus Capital’s Lotus Capital Halal ETF- an ethical variant of ETF based on Islamic principles, recorded a gain of 18.51 per cent. Vetiva Fund Managers’ Vetiva S & P Nigeria Sovereign Bond ETF followed with a gain of 18.18 per cent while two other funds being managed by Vetiva Fund Managers-VG 30 ETF and VCG ETF recorded a gain of 13.48 per cent and 13.47 per cent respectively.

However, New Gold ETF, being managed by New Gold Managers (Proprietary) Limited, recorded a loss of 32.61 per cent while Vetiva Fund Managers’ VI ETF slipped by 1.10 per cent.

Net asset value (NAV) simply refers to the remaining assets of a company or investment after deduction of all liabilities. Net asset value is calculated by deducting total liabilities from total assets at a given period. Unit price is the division of net asset value by the total number of units in the fund.

Further analysis showed that VG 30 ETF remains the largest ETF with a net asset value of N2.72 billion. SIAML ETF 40, which rose by 89.4 per cent, displaced New Gold ETF to become the second largest ETF with N1.13 billion. Stanbic IBTC ETF 30 Fund occupied the third position with net asset value of N657.67 million.

Lotus Capital Halal ETF was launched in 2014 and was the first Sharia compliant ETF in sub-Saharan Africa. It is an open ended fund that tracks the yield and performance of stocks under the NSE Lotus Islamic Index, which was initially developed by Lotus Capital in 2009 and publicly launched in conjunction with the NSE in 2012 to track the performance of Shari’ah-compliant stocks on the NSE.

SIAML ETF 30 was listed in 2014 after successful completion of its initial public offering, which was oversubscribed. The Stanbic IBTC ETF 30 invests wholly in the same portfolio of securities that comprise the NSE 30 Index in proportion to their weightings in the underlying index. The VG 30 ETF-the first equity-based ETF to be listed on the NSE, also tracks the NSE 30 Index.

The Vetiva S & P Nigeria Sovereign Bond ETF was the first bond ETF to be listed on the Exchange. It gives investors access to Nigerian Federal Government bonds in retail lots; thus providing an opportunity for every Nigerian to invest in Federal Government bonds.

The history of ETFs dates back to 1990, when the Toronto Index Participation Fund (TIP 35) was launched in Canada. Since then, ETFs have gained widespread acceptance in most developed markets with demand from global retail and institutional investors leading to a variety of offerings by ETF sponsors. ETFs have become a huge success story, as Global ETF AUM have grown from $1.4 trillion in December 2010 to about $3 trillion as at 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 $ 7 trillion by 2021.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]; Tel: +2347065163489.

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