Exchange traded fund hits N4.24 billion

Brokers on the floor of Nigerian Stock Exchange in Lagos.

Brokers on the floor of Nigerian Stock Exchange in Lagos.

Total Exchange Traded Fund (ETF) Asset Under Management (AUM) on the Nigerian Stock Exchange (NSE) has increased significantly from N287.5 million in December 2011 to N4.24 billion as at September 2016. This, according to the Exchange, represents 1,900 per cent increase.

Besides, global ETF assets have grown from $1.4 trillion in December 2010 to about $3 trillion as at April 2016 representing over 102 per cent growth over the last five years. Experts have also predicted the continued growth of the ETF industry, estimating that global asset will reach at least $7 trillion by 2021.

An ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold.

Addressing participants at NSE ETF 2016 workshop, held in Lagos on Monday, the Chief Executive Officer on the NSE, Oscar Onyema, explained that the ETFs were introduced in December 2011 at the NSE with cross listing of Newgold ETF with asset worth N287.5 million.

According to him, the aim was to provide investors’ with new opportunities to diversify their portfolios and access the market.

“ETFs have become a huge success story, as at today, we have recorded about 1,900 per cent growth in our ETF market with total AUM of about N4.24 billion as at September 2016 on eight ETFs currently listed and traded on the Exchange which include; Newgold ETF, Vetiva Griffin 30 ETF, StanbicIBTC ETF 30, Lotus Halal Equity ETF, Vetiva Sector Series ETFs- Banking, Consumer Goods and Industrial, and Vetiva S&P Nigerian Sovereign Bond ETF (six equity backed, one commodity ETF and one bond ETF).

“Investors now have the ability to quantify and evaluate the trade-offs in our markets, and are able to select the instrument that allows for the most efficient implementation of their desired strategy.”

The NSE boss, who stated that there are currently about 506 investors holding ETFs, also expressed optimism that the growth of ETFs in Nigeria has just begun with support of market intermediaries, stakeholders and the regulator.

He pointed out that the existence of ETFs in the market is beneficial to retail and institutional investors, as it offers a direct and inexpensive way to attain diversified exposure to an index, commodity, sector or region.

Asides diversification and tradability, ETFs, according to Onyema, also offer additional benefits of low expense ratio as compared to mutual funds, increased liquidity and can be used to execute different investment strategies.

“As part of The Exchange’s efforts to develop the ETF market, this workshop has been organised to create awareness of the product, address its challenges and promote its opportunities in Nigeria and Africa. By participating in this workshop, you will gain in-depth understanding of ETFs and Indices and learn how it can potentially benefit issuers and investors.”

He urged intermediaries in the Nigerian market to replicate the global ETF industry success in Nigeria through product innovation and enhanced service delivery to investors.

“Every opportunity to improve knowledge and strengthen the market such as this workshop should be fully put to good use. The Exchange remains committed to partnering with all market stakeholders, to continue to build and develop the Nigerian capital market while offering a wide range of investment vehicles for all investors,” he added.

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