Nigeria’s exchange traded fund, ETF NGE, pulls 34.13% return in 2017 on equities rally
The Global X MSCI Nigeria ETF (NGE), which invests in among the largest and most liquid companies in Nigeria, made an annual return of 34.13 percent in 2017, according to data gleaned by businesamlive.
The impressive run of the fund in 2017 has been largely attributed to the rally in the Nigerian equities market, which began in the second half of the year.
The 34.13 percent return contrasts hugely with the loss of 42.11 percent in 2016.
The fund, which is traded on The Nigerian Stock Exchange, is much like stocks and holds assets such as stocks, commodities, or bonds. It specifically trades close to its net asset value over the course of each trading day.
It is therefore a pooled investment vehicle with shares that can be bought or sold throughout the day on a stock exchange at a market-determined price. It’s an investment that is built like a mutual fund but trades like an individual stock. The most common ETFs, like the Nigerian ETF, are designed to track the performance of a market benchmark, or “index.”
Specifically, the Nigerian stock market, which the fund invests in the largest and most liquid companies, gained traction in the second half of the year, thanks to bargain hunting, positive earnings expectations and improved economic data.
The fund follows the MSCI All Nigeria Select 25/50 Index, holding 23 stocks in its basket with the top three firms dominating the portfolio with 44 percent of assets. Other securities hold no more than 5.02 percent share.
From a sector look, financials takes the top spot with 51 percent share, closely followed by consumer staples at 37 percent.
As of Tuesday the fund’s net assets stood at $70.03 million with a year-to-date return of 29.80 percent and a yield value of 1.94 percent. Available data indicate that the fund closed $26.41 Tuesday from a previous close of $25.74, representing a 2.6 percent price gain.
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The fund invests at least 80 percent of its total assets in the securities of the underlying index and in American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”) based on the securities in the underlying index.
The underlying index is designed to represent the performance of the broad Nigeria equity universe, while including a minimum number of constituents. The fund is non-diversified.
The ETF NGE charges 68 bps in annual fees and has a Zacks ETF Rank #5 (Strong Sell) though with a high-risk outlook.
The fund top 10 investments/holdings in the Nigeria equities market account for 71.26 percent of its total assets, with its Guaranty Trust Bank holding standing at 13.84 percent followed by Nigerian Breweries (12.09%), Nestle (9.59%), Zenith Bank (8.49%), FBN Holdings (5.53%), Access Bank (4.56%), UBA (4.53%) ETI (4.36%), Dangote Cement (4.29%), and Stanbic IBTC (4.18%).
The ETF industry has attracted almost $3.5 trillion in new business since the start of 2008, coinciding with one of the longest bull runs in US stock market history.