By Sola Oni
The NGX has been operating in an atmosphere of currency devaluation, scarcity of forex, stagflation, and recurring insecurity among others.
It, therefore, does not require a crystal ball to predict that the NGX will end the first half of the year in red.
But against the background of the inclement operating environment, the – 6.2 percent decline indicates that the market has really weathered the storm and if the macroeconomic vagaries and insecurity issues are addressed, the market has strong potential to rebound in the second half.
By the NGX’ report card, the aggregate market value of all quoted equities declined from 2021’s opening value of N21.057 trillion to close the six-month period at N19.760 trillion, representing a drop of N1.297 trillion or 6.16 per cent. Under the prevailing operating environment, Securities dealers in Nigeria are daily inundated with the question of where to invest for robust return.
There are many asset classes in the Nigerian capital market, but hedging them against inflation remains the big river to cross. However, discerning investors are yearning for the safety of investment with a solid return.
This has, probably, prompted front line security dealing outfit, Futureview Asset Management, to secure regulatory approval of the Securities and Exchange Commission (SEC) to float two mutual funds – Futureview Dollar Fund and Futureview Equity Fund, both open-ended investment vehicles, targeted at institutional and individual investors.
In investment parlance, a mutual fund is a professionally managed investment that pools fund from many investors to purchase different asset classes, especially, equity and fixed income securities.
At the core of mutual fund is diversification and professional management of investment by the fund managers. An investor’s shares in a mutual fund represents his part ownership and income that the fund generates. In the United States, mutual fund accounts for the largest investment in equity.
Futureview Dollar Fund which is targeted at both Nigerians in diaspora, foreign investors, and those in the country is 15,000 units at $100 per unit while Futureview Equity Fund comprises 5,000,000 units of N100 each, both at par. A source who volunteered information said the Dollar Fund had already been on sale while the Equity Fund would hit the market very shortly.
The first female stockbroker in Nigeria, Mrs Elizabeth Ebi, is the Group Managing Director of Futureview Group. The distinguished Chartered Stockbroker and a First-Class Graduate of the prestigious New York University with MBA from George Washington University, is unassuming. But she gave an insight into the funds that are already generating conversation in the financial market: “The funds have come at an auspicious time in the industry and the economy. People are struggling to hedge against inflation and devaluation of the Naira.
The stock market is at the rock bottom level. I believe that mutual fund is the best method to enter the markets at a period like this. The funds will not only hedge investors against aforementioned risks but guarantee return at steady flow”.
By the Funds’ prospectuses, they are open-ended unit trust schemes, targeted at Pension Fund Administrators (PFAs), insurance companies, Cooperatives, Institutional and Individual Investors among others.
Aside from professional management and affordability, people also invest in mutual fund for liquidity. An investor in an open-ended fund can take advantage of rising share prices to realize his profit. Mutual fund is not new to the Nigerian financial market. But not many investors appreciate its benefits. Some capitalize on the belief that it causes dilution of holding. Some finger perceived high cost of management, especially, when one invests in many mutual funds and the so-called exist load.
However, the benefits of this investment vehicle far outweigh the downsides. Investment in mutual fund is safe, one can invest in smaller denomination, the processes for acquisition is quick and hassle-free, it is tax-efficient, payment is automated, it can be easily planned in consonance with one’s investment objective and can be a one- time investment.
This is where consultation with securities dealers commonly called stockbrokers becomes imperative for sound investment advice on processes and procedures for participation in unit trust schemes. They conduct research and do a lot of analysis to be on track with upcoming changes daily. With the current challenges in the global economy and negative return on investment in Nigeria, mutual funds present an alternative investment model towards sustainable positive return.
Oni, Communications Consultant, Chartered Stockbroker and Commodities Trader, is the Chief Executive Officer, Sofunix Investment and Communications