Investors in Nigeria’s equity-based funds witnessed over N400million increase in the value of their assets in one week, Business Day investigations have shown. The value increase, considered by some analysts as impressive, is driven by investors’ increased appetite for the collective investment funds in the midst of heightening market related risks.
Consequently, while majority of the 17 equity-based funds reported growth in their unit prices,their cumulative net asset value (NAV) grew to N45.14 billion as at July 4 against N44.65billion in the preceding week.
The implication, according to the analysts, is that the unit holders of the equity based funds would leverage on the value increase to cushion the effect of the previous losses they faced, relating to their investments.
Equity-based fund is a collective investment scheme that is usually invested principally in stocks by their various managers. It is also known as a “stock fund”.
Statistical report from the Securities and Exchange Commission (SEC) on Collective Investment Schemes (CIS) shows that unit price of Stanbic IBTC Nigerian Equity Fund rose from N11, 631.58 to N 11,825.41; that of ARM Discovery Fund rose from N333.51 to N337.84; while the unit price of Nigeria International Growth Fund appreciated from N1.83 to N1.85.
Also, the unit price of Legacy Fund rose from N1.46 to N1.49; IMB Energy Master Fund rose from a unit price of N2.61 to N2.67; unit price of Frontier Fund appreciated from N123.04 to N124.09; Paramount Equity Fund rose from N14.24 to N14.35 per unit; and UBA Equity Fund also rose from a unit price of N1.02 to N1.05.
Net asset value represents a fund’s per share market value, and it is from NAV that the price per unit of a fund is calculated.
“As political and security risks loom, investors are becoming pessimistic and cautious in the equities market, risk averse investors are therefore moving towards equity based funds which offer them reduced exposure to risk, broad diversification, and economies of scale,” said Kayode Omosebi, analyst at UBA Capital.
The analyst said they expect more interest in equity-based fund as investors become more aware of this investment vehicle, along with looming risk in the market.
“Sound regulation in this space by the SEC has also helped boost investors’ confidence for equity-based fund. For example, at the start of the quarter, the UBA balanced fund opened at N1.2589 but is currently at N1.3504 driven by investors interest in diversified portfolio of securities across asset classes,” Omosebi told BusinessDay.
Also, ARM Aggressive Growth Fund recorded unit price growth from N16.98 to N17.30; while the unit price of ACAP Canary Growth Fund moved up from N0.69 to N0.70; Bedrock Fund recorded unit price growth from N1.09 to N1.12; Zenith Equity Fund grew from N15.48 to N15.51; unit price of Afrinvest Equity Fund appreciated from N168.45 to N172.01; while that of BGL Nubian Fund rose from N1.12 to N1.15.
Femi Ademola, head, research and intelligence, BGL plc is of the view that “the most obvious driver is market development and security selection”.
He said: “The market has witnessed some positive sentiments lately, driven by some particular stocks which have gained very impressively. Funds that are invested in these stocks are bound to rally.”
Abiola Rasaq, market analyst at Associated Discount House Limited, who observed that the NSE ASI gained 2.0% in the week ended 4th July, largely on the back of a strong 4.17% rally on Dangote Cement said “most equity funds have exposure to Dangote Cement, thus explaining the price increase of the funds in the week.”
He said “The rally in each fund’s price depends on its relative exposure to Dangote Cement and other large-caps that rallied in the week”.