14-11-2015 by 
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For a lot of investors, now may be the time to be more daring than ever before. Various problems that threatened to derail the stock market’s impressive gains of yesteryears seem to be  receding.  At least the "change train" being driven by Buhari seems to be taking off  even as the Central Bank says "No" to further devaluation of the Naira. The menace of insurgency is abating or coming to an end and corruption seems to be either looking for a hiding place or  trying to board the next available flight out of Nigeria.

Though while the price of crude oil is yet to recover, interest rates are painfully low on fixed-income investments such as bonds and treasury bills leading to rising bond prices. The god part of this however, is that the government may be able to borrow at a cheaper rate thereby reducing its borrowing cost. For the equity market, it has been zig here and zag there. This zigging and zagging   has resulted into the  "not too good" performance by equity based mutual funds.

Bond Funds To The Rescue

Even in the mix of those vicissitudes that have characterized the market for a greater part of the year, Nigerian Bond mutual funds have soared while the average stock mutual fund slid  some o percentages in a predominantly down market this year.

In the month of October 2015 for example, all but one out of the 8 bond funds ( excluding BGL Sapphire fund)  in the Nigerian Mutual fund universe gained, howbeit small. The greatest gain was made by Stanbic IBTC bond fund which returned 2.89% followed by UBA bond fund with 2.62%. The only fund that made a loss during the month is the FBN Fixed Income fund with a 3% loss.

 Bond

Source: Quantitative Financial Analytics

With that performance, bond funds  have recorded an impressive year to date ( as at 10/31/2015) return. While UBA Bond Fund has the trophy for the highest YTD gain of 12.2%, Stanbic IBTC Bond Fund and Stanbic IBTC Guaranteed Income Fund  take the second and third places with 10.27% and 9.78% respectively.  The newest fund in the bond fund category, SFS Fixed Income fund  took the fourth place with a 9.26% return. One good news about the SFS Fixed Income fund   is that since it debuted in September 2014, it has not recorded any monthly loss. YTD

Source: Quantitative Financial Analytics

It is not surprising however that the bond funds are doing so well after-all it is a dictum  almost self evident that when yield falls, prices of bonds rise. Against that back drop, one can see that the bond funds may be poised to end the year with mouth watering performances should yield remain as low as it has been.

 

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