Top Funds For These Hard Times

Top Funds For These Hard Times

The need for savvy investors to do in-depth analysis before committing funds to any investment vehicle cannot be over-emphasised. More importantly, this will prevent loss of capital occasioned by rash investment decisions.

However, if you are so occupied or are a new investor, managed funds could help turbocharge your portfolio of investments (see the table below). But before you take a plunge, take cognizance of the following:

  • YOUR FINANCIAL GOALS: You have to investigate to know whether the fund manager’s style aligns with your goals. If you are interested in regular incomes, but the fund invests for capital growth, there is obviously a mismatch. Younger people tend to invest for capital growth rather than for income. So, weigh other funds. In addition, you could plough back your dividend to increase your holding.
  •  ATTITUDE TO RISK: While it is true that risk tolerance level varies, many investors have yet to grapple with this reality. Funds that invest mainly in equities are riskier than those that invest in bonds; likewise, sector-focused funds are more susceptible to risk than funds whose portfolios are spread across sectors. Also, corporate bonds are less safe compared with government bonds. Consider your attitude to risk before opting for a particular fund. Demand higher returns for taking on greater risk.
  •  EXPENSES: Shop for a fund with relatively low expense ratio. Some do not charge exit fees which makes them better alternatives. Also, check the spread to have an idea of the commission you have to pay when buying or selling units of the fund. This is a hidden cost that is hardly considered by many investors. It is the difference between the offer and bid prices.
  •  DIVERSIFICATION: Dig deep. Go for funds whose portfolios are spread across different asset classes of equities, bonds, property and money market instruments. Apparently, this would minimise your risks and make your capital safe. In addition, evaluate the core holdings of the funds. Unnecessarily high exposure to a particular company or sector is a potential threat to your capital.
  • HISTORICAL PERFORMANCE: Although past performance is not a guarantee of likely future profits, it serves as a useful guide to investors. A consistent good performance is better than erratic results. Nonetheless, a temporary hitch is not enough reason for you to call it quits with your fund manager if caused by external, uncontrollable factors.
  • INVESTMENT STYLE: Check the methods adopted in picking stocks by the fund managers. Do they carry out proper analysis? Do they have a contemporary research department staffed with experienced professionals with good track record? Do they pick stocks based on market sentiments? Probe these.

We have compiled a list of top funds that can maximise your returns in this angst-filled time. But remember that there are other funds authorised by the Securities and Exchange Commission which are not registered with the Stock Exchange.

Stanbic IBTC Nigerian Equity Fund, the first mutual fund by Stanbic IBTC Asset Management Limited, has been around since 1997. The manager adopts a variety of investment styles giving rise to assorted funds in consonance with investors’ preferences. This mutual fund invests at least 75% of its assets in stocks of quality companies that can easily navigate through crisis. The balance is invested in money market instruments. It ranks among the top performing funds because it benefits from the high returns offered by equities as a big chunk of the fund is in equities. This compensates the investors for taking higher risk.

Commencement: 1997
Manager:  Stanbic IBTC Asset Management Limited
Investment Style: Minimum of 75% in blue-chip companies
Maximum of 25% in money market instruments

Investors are afforded the rare opportunity to invest without compromising their moral beliefs. Companies whose activities are deemed inimical to social norms or societal health are excluded from its portfolio. Breweries, tobacco companies and suchlike do not excite this category of investors. So, achieving an appreciation of 28% in the last 11 months without dodging your vicarious liability to others seems spectacular.  The portfolio may not grow aggressively but it a double-edged sword which allows you to secure your future and contribute your quota to curbing some ills in the society. What is more gratifying than this?

Commencement: 2005
Manager: Stanbic IBTC Asset Management Limited
Investment Style: Minimum of 75% in equities of well-established companies
Maximum of 25% in the money market

A bulk of this fund is invested in federal government bonds and money market instruments to hedge against vagaries of the stock market. Not more than 25% is invested in equities and preservation of capital is the general thrust. This fund protects unit-holders’ money – or at least it does not lose as much as some mutual funds during market downturn. Investors hardly need to be reminded of what happens when fund managers take on too much risk. Stanbic IBTC Guaranteed Fund earns a modest, but not always spectacular, return by employing a steady approach that prevents erosion of investors’ capital. The Fund has gained 40% since inception; an increase of 18% in the past 20 months trails about 30% of its peers. If you are averse to risk, consider this fund.

Commencement: 2007
Manager: Stanbic IBTC Asset Management Limited
Investment Style: Minimum of 75% in fixed income securities
25% in equities of NSE quoted blue-chip companies

It is a well-diversified fund which aims to spread risks by investing in different asset classes of equities, fixed market instruments and real estate.FBN Heritage Fund gives the individual investor leverage of holding various types of investment vehicles in his portfolio. Investors who desire long-term capital growth should consider this fund. FBN Capital Limited, a subsidiary of FBN Holdings Plc, is the fund managers while Leadway Trustees Limited acts as trustees. Also, your investment is safe to some extent.

Commencement: 2007
Manager: FBN Capital Limited
Investment Style: 50-65% in stocks
1525% in bonds
510% in the money market
0-5% in property

BGL Sapphire Fund guarantees the principal invested by investing in only fixed income securities. Stocks are excluded from its portfolio owing to their volatility. This fund is suitable for investors who have no penchant for high risk associated with stock investing.

Commencement: 2010
Manager: BGL Asset Management Limited
Investment Style: 75% in bonds
25% in money market securities