By Peter Egwuatu
As the stock market gradually regains investors’ confidence, capital market regulators are canvassing for a new window of investment opportunity, such as mutual funds to be open to investors in order to improve the equity market.

Arunma Oteh, SEC DG

A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in stocks, bonds, short_term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals.

Mutual fund has a fund manager that trades (buys and sells) the fund’s investments in accordance with the fund’s investment objective. In Nigeria , the Securities and Exchange Commission (SEC) under the Investment and Securities Act (ISA) register and regulate mutual fund.
The mutual fund also allow small investors opportunity to invest in many stocks through a pool of funds. With the mutual fund, investors would have the opportunity to diversify its risk portfolio and maximize returns.

Meanwhile, the regulators in the capital market, the Securities and Exchange Commission (SEC), Nigerian Stock Exchange (NSE) have been encouraging operators in the capital market to create products, such as mutual fund that will help boost the equity market.

There are few mutual funds in the market, a development that does not augur well to the growth of the market. The mutual funds industry in Nigeria has not really being developed and so is still in its infancy level compared to what obtains in the developed countries. Some of the reason for the low growth of fund could be attributed to the lack of basic information about most of the funds (by their managers) and the lackof professionalism.

ARM and IBTC were the pioneers in the mutual funds industry in Nigeria and at the moment about 26 funds are listed on the Exchange.
However, a new vista of investment opportunity has opened to investors who are interested in earning attractive returns in the medium to long term as BGL Asset Management Limited offer for subscription of 2 billion units of BGL Sapphire Fund of N1.00 each at par and BGL Nubian fund of 500,000,000 units of N1.00 each at N1.00 per unit continues to receive positive response from investors.

The Managing Director of BGL Asset Management Limited, Mrs. Modupe Mujota, said, BGL Sapphire Fund aims to achieve competitive returns for investors interested in earning attractive returns in the medium to long term by investing in a diversified portfolio of investment grade fixed income securities.

According to her, the principal sum invested in the fund is guaranteed against any diminution in value, provided the units are held for a minimum of three months.

During the offer period, she explained that units in the Fund may be purchased at the subscription price.  Subsequent to the offer period, she added that additional units in the Fund would be created and purchased on demand by subscribers on an on_going basis at a price computed in accordance with the Securities and Exchange Commission’s approved basis for computing the offer.

Mujota added that the Fund would be open_ended and investors would be at liberty to subscribe to its units through the Fund Manager after the Initial Public Offer. Although the Fund has an initial target of 2 billion units, he said the Fund Manager would issue additional units of the Fund to subscribers on demand after the initial tranche of 2 billion units has been fully subscribed.

According to her, a minimum of 70 per cent of the assets of the Fund would be invested in equities while not more than 30 per cent would be deployed in fixed income and money instruments, stressing that the Fund is appropriate for investors who wish to subscribe on behalf of their wards or dependents as a matter of securing their future. The Fund which is open_ended has an initial target of 500,000,000 units, opens on October 4 and closes on November 10,2010.

The Chairman of BGL Asset Management Limited, Albert Okumagba, explained that the Funds offer an opportunity to achieve good returns while minimising risks, from a diversified portfolio of investments, which may not otherwise be available, in significant quantities to individual investors.

He noted that the Funds also offer an opportunity to subscribers for units on behalf of and in the name of minors or charitable organisations, adding that when such minors reach legal maturity, they can either continue with the investment or redeem some or all of the units held in their name, provided that they hold the number of units prescribed by the manager from time to time.

According to Okumagba, BGL Sapphire Fund would invest in a number of individual bonds of varying maturities and features, noting that historically, bonds have offered a higher yield than money market instruments, and exhibited less volatility than stocks.

In addition, he said, the return on bonds has often offset the negative return on stocks during periods of market downturn, stressing that ‘’as a result, adding bonds to an all_stock portfolio generally lowers overall portfolio risk.

He however, disclosed that the BGL Sapphire Fund is authorized and registered in Nigeria as a Unit Trust Scheme under Section 160 of ISA, adding that the Fund is governed by the Trust Deed with UBA Trustees Limited as the Trustee. Both Oceanic Bank and UBA Plc are the receiving banks for the Funds while BGL Securities Limited is the Stockbroker to the offer.

Two open ended mutual funds available to the public have been launched by BGL Asset Management Limited. The BGL Nubian Fund, positioned to invest primarily in the equities market, offers for subscription 500,000,000 units at N1.00 per unit. The BGL Sapphire Fund, a fixed income fund which guarantees the principal investment, offers for subscription 2,000,000,000 units at N1.00 per unit.

Both funds are being targeted at investors interested in earning attractive returns in the medium to long term by investing in a diversified portfolio.

In a chart with the  Director of BGL Asset Management Limited and Deputy Group Managing Director of BGL Plc, Mr. Chibundu Edozie,  intimated Vanguard that the Nubian Fund has been developed for investors with a higher appetite for risk in their investment strategy to take advantage of medium to long term growth anticipated in the Nigerian equities market while the Sapphire Fund is targeted at investors with a lower appetite for risk in their investment strategy, given the relatively safe and stable outcome of investing in Fixed Income instruments.

According to him, “both Funds have received the final approval from the Securities and Exchange Commission (SEC) and opened on October 11, 2010 to be offered till November 17, 2010. All mutual funds in Nigeria, like the Nubian and Sapphire Funds are regulated by the SEC. Further approval has been given to UBA Trustees Limited to act as trustees of the funds.

‘’Mutual funds such as the Nubian and Sapphire Funds enable investors to diversify their risk as they invest in a variety of asset classes, encourage a savings culture and offer investors (including small scale investors) access to the expertise of professional fund managers which may otherwise have been unaffordable.

We are confident that with our Nubian Fund, we will capitalize on the low valuations of the market’s blue chip stocks, and to this end aid profitable investment through proper planning and execution”.

Giving further insight to the investment strategy of BGL Asset Management Limited, Mrs. Mujota added that “The bond market has seen tremendous growth in recent years, with new FGN bond issues, and various sub_national issues providing decent yields to investors.
Mujota, added that the recent experience of investors in the Nigerian equities market highlights the importance of the role of professional fund managers.

According to her, “ BGL Plc has participated actively in this budding market. With the BGL Sapphire Fund, we intend to take advantage of this investment window and provide our clients with appropriate portfolio diversification based on our knowledge and expertise of the market”.

On conclusion of the allotment process the funds will be listed on the Nigerian Stock Exchange (NSE). Information on the up to date valuation of the funds will be available via the NSE website, daily official list and other publications such as selected newspapers.
BGL Asset Management Limited is a wholly owned subsidiary of BGL Plc, a leading Nigerian financial services firm providing investment management and wealth management services. The firm’s biggest asset is its human capital which is efficiently deployed to serve its rapidly growing local and international clientele, from offices strategically located across Nigeria.