Opinion: Anti-corruption, Regulatory Oversight Boost Investors’ Confidence

By February 13, 2017 Investment News

The Chief Executive Officer, Stanbic IBTC Asset Management Limited, Mrs. Bunmi Dayo-Olagunju in this interview with a Financial Vanguard spoke on the need for investors to diversify their portfolio of investments, restoration of investors’ confidence in the Nigerian capital market, shedding more light on mutual fund products, industry issues, among others. Excerpts: CAPITAL markets thrive on investor interest in the investment opportunities that the capital market has to offer. Will you say that the steps taken so far by capital market regulators as well as the government have been effective in restoring confidence in the market? Quite correctly, the concerted efforts of the Capital Market Operators and the regulators have contributed immensely towards restoring investor confidence in the market. The Federal governments’ stance on zero tolerance for corruption, coupled with increased regulatory oversight from authorities instituted by government, has, to a large extent, helped to restore confidence in the market

Excerpts: CAPITAL markets thrive on investor interest in the investment opportunities that the capital market has to offer. Will you say that the steps taken so far by capital market regulators as well as the government have been effective in restoring confidence in the market? Quite correctly, the concerted efforts of the Capital Market Operators and the regulators have contributed immensely towards restoring investor confidence in the market. The Federal governments’ stance on zero tolerance for corruption, coupled with increased regulatory oversight from authorities instituted by government, has, to a large extent, helped to restore confidence in the market

CAPITAL markets thrive on investor interest in the investment opportunities that the capital market has to offer. Will you say that the steps taken so far by capital market regulators as well as the government have been effective in restoring confidence in the market?

Quite correctly, the concerted efforts of the Capital Market Operators and the regulators have contributed immensely towards restoring investor confidence in the market. The Federal governments’ stance on zero tolerance for corruption, coupled with increased regulatory oversight from authorities instituted by government, has, to a large extent, helped to restore confidence in the market.

Asides the market fundamentals, other critical factors that would be expected to stimulate an economy would be hinged on how swiftly the Federal Government enacts policies and reforms that would lift the economy out of recession. In addition, the ability of the government to increase foreign exchange inflows via any or a combination of factors such as sustained increase in daily crude oil production, external borrowing from development finance institutions/investors and sale of certain assets to finance capital projects, stimulate aggregate demand and shore up foreign reserves would undoubtedly go a long way in resuscitating the ailing health of the economy.

A noticeable decline in the number of public offerings and a general lack of enthusiasm towards IPOs is recorded. What are the possible benefits derivable from investing in SIAML Pension ETF 40 and Stanbic IBTC Dollar Fund that would over-ride these concerns?

In spite of the current economic challenges, we have witnessed increased interest from potential investors who have idle dollar cash and are eagerly seeking to take advantage of investment vehicles that would provide them with competitive returns on their investments. The Stanbic IBTC Dollar Fund would provide such investors with bias for dollar denominated securities access to such securities which ordinarily would be inaccessible to them by virtue of the high amount typically required to make such investments.

How does ETFs enable investors diversify their portfolios?

Stanbic IBTC Asset Management Limited recently introduced two new financial instruments, the SIAML Pension ETF 40 and Stanbic IBTC Dollar Fund. The SIAML Pension ETF 40 is an Exchange Traded Fund that has been designed to mirror the combined returns of the 40 most liquid public quoted companies on the Nigerian Stock Exchange, which meet the National Pension Commission (PenCom) requirements for investing pension assets. It would also be useful to add that PenCom is the regulatory agency that oversees pension administration in Nigeria and has developed investment guidelines to ensure the preservation and sustainability of pension assets, and the security of pension obligations when due. With regards to the Stanbic IBTC Dollar Fund, it seeks to provide an alternative to locally available low yielding dollar-denominated investment opportunities. It primarily provides investors with the opportunity to achieve diversification via attractive dollar denominated securities with competitive yields that compensate adequately. As such, the overriding objective is to provide our clients and potential investors with competitive and attractive instruments for achieving their investment objectives of hedging themselves against a continuous Naira devaluation.

You described the SIAML Pension ETF 40 as an Exchange Traded Fund that will mirror the Pension 40 Index (Pension Index) and replicate as closely as possible the total return of the NSE Pension 40 Index. What exactly does this mean to a potential investor?

To put it simply, it means that if an investor will like to achieve returns similar to that of the Pension Index, that is, top 40 permissible stocks for pension assets, he or she should purchase units of SIAML Pension ETF 40 as it is the easiest and most efficient way of achieving the desired returns of the Pension Index.

What kind of risks should anyone interested in investing in SIAML Pension ETF 40 have in mind considering that investment in financial instruments entails some measure of risks?

Investors should consider market risk as the SIAML Pension ETF 40 would be subject to normal market fluctuations and risks associated with investing in equities in general or particular industries represented in the market. The value of any of the securities that make up the NSE Pension Index may decline due to any or a combination of the factors mentioned above or other events not specifically related to an issuer of a security. In addition, the performance of the securities in the NSE Pension Index may be affected by changes in economic environment, political developments or changes in government policies, growth rate and allocation of resources, changes in legislation and regulatory requirements.

Stanbic IBTC Asset Management Limited has about eight mutual funds under management, including the Stanbic IBTC Nigerian Equity Fund, Nigeria’s largest equity mutual fund. Despite the plethora of mutual funds in the market, there seems to be limited knowledge of their availability, which in turn affects patronage. How do you think mutual funds could be demystified?

Despite this array of mutual funds and others in the market, there are close to 250,000 unit holders in Nigeria, an insignificant proportion when juxtaposed with the country’s population of more than 170 million people. In essence, all capital market operators duly registered with the Securities and Exchange Commission as well as the regulator itself have a collective responsibility of embarking on financial literacy campaigns that would particularly enlighten the millions of Nigerians presently affected by the low savings and investment culture. Such initiatives would go a long way in sanitizing the market and further improve public awareness for mutual funds. Also, publicizing the unique benefits of mutual funds would equally help demystify the erroneous impression that investments of this nature is reserved for the rich and well heeled. In Nigeria, you need as low as N5,000.00 to invest in mutual funds.

Capital market operators

In addition, capital market operators also require the support of the regulatory authorities to crack down on the prevalence of unregistered and unregulated ‘fund managers’, including wonder banks as they have been seen to be major contributors to low penetration of mutual funds in the market.

The Stanbic IBTC Group is well known for its outstanding leadership role in organizing public forums through which accurate information on the Nigerian economy are made available to enable investors and other stakeholders take informed decisions. To what extent have these forums been useful in influencing investment decisions on Nigeria?

We organise fora that cater for various categories of investors, some of which are aimed at encouraging retirement planning among workers and employers. Participants have gained valuable tips from experts and regulators on the imperative of putting in place effective plans to ensure a smooth transition to retirement. Additionally, our forums have provided major investors with a platform wherein they can access vital information on macroeconomic issues and the direction of the market as provided by key note speakers and captains of industry to help them make informed decisions on the Nigerian economy.

Source: Vanguard