August was a tough month for most types of mutual funds in Nigeria with almost every category tracked by Quantitative Financial Analytics Ltd losing value amid fears of increased volatility in the market and the delay by the Buhari administration to form a cabinet and come up with fiscal policies for the country.
According to data released by the Nigeria Security and Exchange Commission on August 28 and analyzed by Quantitative Financial Analytics, of all the 55 mutual funds in Nigeria, 22 were losers in August. While 11 funds recorded positive performance , 8 funds just broke even with zero return. This number excludes money market funds because they are required to maintain their par values. However, using their yield as a proxy for their valuation and performance measurement, shows that all the money market funds ended the month with positive returns of less than 1% except for UBA Money market fund.
Source: Quantitative Financial Analytics
The four hardest hit funds are Stanbic IBTC Imaan fund (-6.1%),Afrinvest Equity Fund, (-6.17%), Legacy Fund, (6.93%) and Zenith Equity Fund, (-6.98%). Among the funds that ended the month of August with positive returns are UBA Bond Fund, (6.07%), New Gold ETF, (3.64%), UBA Money Market Fund, (1.25%) and Stanbic IBTC Absolute Fund, (1.01%).
A Sectorial look indicates that only one Equity based fund, ACAP Canary Fund made a positive return of 0.92% while the rest of the funds in this category recorded negative returns.
Source: Quantitative Financial Analytics
On the other hand, every fund in the Bond category, (except for Stanbic IBTC Bond Fund with a negative return of 0.19%, ) closed the month with positive returns. This is often the case in that when equity markets falter, fixed income funds benefit from their status as safe harbors and post strong gains.
The story was not so rosy for Balanced based funds and Ethical based funds, two categories whose constituent funds all made losses. In like manner, only Stanbic IBTC Absolute Fund dispatched the month of August with a positive return of 1.01% among the funds in the Umbrella category while New Gold ETF is the only fund in the ETF category that saw off the month of August with a positive return (3.64%). On the average, the entire mutual fund industry made a loss of -1.85% for the month.
A comparative look at the underlying indices indicates that not only did most of the mutual funds lose money, they were out- performed by their indices. While the worst hit mutual funds lost about 6% of their value in August, the NSE Allshare index lost just 1.64% . However, the NSE 30 index which is being tracked by the IBTC 30 ETF and the Vetiva 30 ETF lost 2.42% meaning that Vetiva ETF's August performance of negative 1.1% outperformed the index while the IBTC 30 ETF with a return of negative 5.89% failed to beat the index. New Gold ETF seemed to be the best performer as it returned 3.64% against the 3.48% made by Gold.
The picture is a mixed bag on a YTD basis. While 20 funds still show positive YTD returns (howbeit small), 27 funds are showing negative YTD returns, some of them in double digits. The worst performers are Legacy Equity Fund, (-21.67%), Zenith Equity Fund, (-12.95%), Vetiva ETF, (-12.74%), Stanbic IBTC 30 ETF, (-12.48%), Stanbic IBTC Nigeria Equity Fund, (-12.46%) and Afrinvest Equity Fund , (-12.14%) and Nigerian International Growth Fund,(-12.05%). Though the YTD returns look scary, a look at the underlying indices shows that all the mutual funds except Legacy Equity Fund beat the YTD return of negative 14.35% made by the NSE Allshare index, while New Gold ETF's YTD return of 2.27% is a far cry from Gold's dismal performance of negative -4.35%. On the other hand, the YTD return of -12.74% and -12.48% recorded by Vetiva 30 ETF and Stanbic IBTC 30 ETF respectively beat the -15.05% return by the NSE 30 Index.
As can be seen above, losses were more severe with equity based funds while money market and bond based funds had a home run. It is expected that investors will continue the fight to quality which has been the posture since the beginning of the third quarter of the year and evidenced by the fund flow analysis below. This is because usually when the going gets tough, many investors consider the money market and bond funds as a safe haven.
Mutual Fund Flow Trend
According to the latest numbers available from Quantitative Financial Analytics Ltd and based on the latest NAV summary released by the SEC, Nigerian mutual funds attracted an estimated net inflow of N38.25 billion so far this year, N35.1 billion were invested in money market mutual funds and exchange-traded funds attracted N1.6 billion while Real estate funds garnered N1.9 billion
Meanwhile, equity funds witnessed net outflows of N273 million arising from inflows of N3.2 billion and outflows of N3.47 billion. Fund flows into the rest of the categories were unimpressive as they only amount to a few millions. It is expected that investors will invest more in money market and bond funds to the detriment of equity based funds.