Mutual funds represent investment opportunities often ignored or even
misunderstood by retail investors. However, the sub-sector has been
recording phenomenal growth in the last three years. For example, the
sub-sector recorded 48 per cent growth in Net Asset Value to N1.494
trillion in 2020 from N1.006 trillion in 2019.
In this
interview, Ete Ogun, CEO of Anchoria Asset Management, a subsidiary of
VFD Group, a proprietary investment company, speaks about factors that
will shape the sub-sector in 2021 as well as the need for investors to
include equities in their investment portfolio.
QUOTE
I
also know High Networth Institutions (HNIs) that do mutual funds. I
mean in terms of the returns that we have there is no other way you
could have made this sort of returns, so why won’t you be in them?
Data
from the SEC indicate that the asset management sector had a great year
in 2020. Net Asset Value rose to N1.494 at the end of 2020 from N1.006
trillion at the end of 2019, indicating 48% year-on-year growth.
Do you see the sector repeating or exceeding this performance in 2021?
Interestingly
2020 was a year of mixed emotions. It was good in some things and not
in some things. If you say that mutual funds enjoyed increased returns
on investment, you are not incorrect. But again it is sectorial. If you
do the analysis of the sort of mutual funds, then you will be able to
determine where those gains come from.
So to start the year, the
money market fund was good, the fixed income fund was good, the equity
fund was standard. And as the year progressed, they began to increase in
returns. But as the year started to end, the money market fund began to
dovetail while the fixed income and equity sectors did better. So it is
a function of which funds you have.
Luckily
for Anchoria, we have the three funds so we had mixed sentiments for
the year. We had good performances in the fixed income fund and the
equity fund which if you pair them together in terms of returns, you
will get about 46% returns, which is not far from the average of 48%
that you spoke about. So it is understandable to say it was a good year,
but I will rather say it was a year with mixed reactions and emotions,
and we are happy that we did not do too badly even though we believe we
could have done better.
For the performance of the sector this
year, I am an optimist. I always believe that in spite of everything you
must always hope for the best, even if you try to plan for the worst.
But
as long as people have jobs and businesses thrive, it is about
targeting those people and getting them to invest. There will always be
opportunities.
What I suspect will drive this year is a value that
will be created in equities because of the low yield in the money
market. So people should get more yields from equities, but will people
come to equities considering that they still have apathy? It is like
what I always tell my clients, young people have no business not being
in equity. And when I say young people, I mean people below 50 years.
They should always have an equity investment, it helps the return on
their portfolio.
So I expect 2021 to be a recovery year but we
should have some increase in returns in the equity market and if we
position bonds well, based on where they seem to be going, things should
also pan out. And then for foreign currency investment also, things
should work well.
You said young people do not have a reason not to invest in equity funds. Why?
When I say, ‘had no reason not to be’, we will now have to determine ‘weighting’.
So
while the person is 50 years, I will say to you because of your age,
because of your circumstance, maybe you should be in equity 15 percent,
but don’t be out of it totally. The younger person should be in equity
funds maybe 60 or 70 percent because they are young. But as they grow
older, that percentage should begin to drop. But what I mean is don’t go
out of it totally.
So for instance, if somebody does an analysis
of your portfolio, you will probably be at 20 percent of your entire, so
when they talk about money you put in your business, the money you put
aside, in equities, you will probably be at about 15 to 20 percent of
your general portfolio. And that is not bad because, by the time you
have done the analysis of the dividend that has accrued to you during
that period, you begin to see that it has played a certain role. It is
just that it is not as substantial so it doesn’t reflect. And if you
calculate it over the years, it comes to something that is tangible.
So you believe that people should play more in equities?
I
believe that you should not go out of any sector totally. You need to
diversify your interest but also you will be mindful of your risk.
Equity in particular protects the time value of your risk.
Again
Nestle shares were once at N300, and then N1500. Imagine the delight for
people who had the opportunity to buy it that five years ago and where
they are today. Then talk of the bonuses that have accrued. GTBank
shares, some people bought it at N5 and it has done well so far, you
don’t just lock yourself out.
What do you consider the major economic factors that will influence the performance of the asset management sector this year?
Like
I said, the yield in the money market space, then the investment
outlets, and the volatility. Basically, if you can manage those then we
should be fine.
Can you elaborate more on the issue of volatility?
When
we look at money market rates in 2020, we closed somewhere at 13%, and
then by the first quarter of 2020, we were somewhere at 11%. By the
second quarter, we were down to 6% and then by the third quarter it was
zero. That is really really volatile.
But it is the same thing
that pushed the fixed income funds and the equity funds up. That is the
double play of it. But those are the things that will happen.
For
people who are in the market, it will encourage more people to put aside
money if they see less volatility because it helps people plan.
Some analysts have predicted that the CBN will return to a tight monetary policy in the second half of this year.
Should this be a concern for the asset management sector and why?
While
I can’t pre-empt what the CBN Governor and his economic team will do, I
will then say, what are the opportunities despite what they do for us?
So what I would then say is, with this tightening, improvement for
FPIs, the OMOs, the question then is, if these FPIs come in, so they
will go into OMO bills, but not all of them will go into OMO bills
because all the other opportunities are vast.
So what are the
opportunities for our sector? They are a lot, as long as you are coming
in to invest. We can then create alternative investments around the
structured investment, looking for value creation that is tied to all of
this money.
So, more than ever, for us, it is to even say, we
need to have an understanding of where these policies are headed, then
we can create opportunities around them. This is against focusing on
whether they are tightening it or not, it is what the opportunities
are, that is our key focus.
Your company has three mutual funds,
with a combined value of about N1.26 billion, which is less than one
percent of the net asset value of the sector.
What are
your growth projections for the three funds in 2021 and what
opportunities do you intend to leverage to achieve this projection?
Yes, we do have three mutual funds and they have less than this market value.
The
equity fund returned about 23 percent last year. In the money market
fund, the average yield for us was about four percent. And our
fixed-income fund did 22 per cent.
But look at when we came in. We
came in 2019 when this monetary loosening started happening. And then
COVID-19 came and threw everybody off guard. It was not a good time and
we threw away whatever strategic plan we had. Now that the world is
recovering, the plan is to compete based on returns and then push our
brand name out there. Once we can do that, we should be set for growth.
So we can then engage more people across the geographical zones based
on those achievements, and we hope that that will in turn push the fund
and grow it better.
What is your target market in terms of customers?
We serve everybody. We have a product for everybody.
Including the masses?
There
is nobody who is a mass. Every ten kobo counts. You are an important
person, your money is important. How can you say the N50,000 I have
worked for is not important because somebody has N1 million?
Yes,
there is a select crowd for each product but there is a place for
everyone, which is in line with our goals, to make wealth accessible to
everyone. That is our mission statement, to make wealth accessible to
everyone.
So based on the product, we determine where you fit. But
we want to cater to as many people as possible. While we are
specialists in investment, we are specialists in investment across
different strata of society. So for the retail people, you will say the
mutual funds. But I also know High Networth Institutions (HNIs) that do
mutual funds. I mean in terms of the returns that we have there is no
other way you could have made this sort of returns, so why won’t you be
in them? And we also have structured products for savvy investors who
understand it, so really we are open to everyone for business.
.jpg)
.jpg)
.jpg)
.jpg)
.jpg)
.jpg)
.jpg)