The Nigerian stock market started the year on a positive note, with the All-Share Index (ASI) posting a 1.53% gain in January 2025.
This performance, though modest, sets the tone for equity-based collective investment funds, whose returns are largely tied to the performance of individual stocks in the market.
Equity-based funds, by their nature, invest in stocks, and their performance tends to mirror broader market trends.
One key advantage of investing in equity-based funds over individual stocks is diversification, which helps mitigate risks by spreading investments across multiple stocks, reducing the impact of poor performance from any single company.
Additionally, these funds benefit from professional management, as experienced fund managers actively research and adjust portfolios, making informed decisions that individual investors may struggle to replicate.
Their ability to outperform or underperform the broad market or underlying stocks depends on their portfolio composition, asset allocation, and risk management strategies.
According to the Securities and Exchange Commission (SEC) valuation reports of December 2024 and January 2025, some funds outperformed the ASI. Below are the top performers in terms of Yield (YtD) in January 2025
Halo Equity Fund: – Yield (YtD 110.79%)
Topping the list of best-performing funds in January 2025 is the Halo Equity Fund, managed by Halo Asset Management Limited.
- With a year-to-date (YtD) yield of 110.79%, this fund has continued its trend of stellar performance, following its 98.91% YtD return in 2024.
- However, a return exceeding 110% in just one month raises questions about the sustainability of such gains.
- Could this be a result of high-risk, speculative investments, or is it a case of a well-managed fund riding on the momentum of a few high-performing stocks?
- Given its relatively small size (N16.644 billion NAV, just 0.05% of the total equity-based fund market of N33.667 trillion), it may be more susceptible to volatility.
- Another important aspect of the Halo Equity Fund is its low bid-ask spread of 0.82, which suggests lower transaction costs for investors.
- However, its limited number of unit holders (just 28) means it remains an exclusive niche fund with a concentrated investor base.
- This could be an advantage in reducing redemption pressure or risk, as a few large investors could significantly influence fund movements.
Hallo Equity Fund is managed by Halo Asset Management Limited. Halo Asset Management Limited offers a variety of financial services, including Naira and USD investment options, savings accounts, and loans. They also provide Shari’ah-compliant investment products.
Frontier Fund
Following closely behind is the Frontier Fund, managed by SCM Capital Limited, with an impressive YtD yield of 72.24% in January 2025, after posting 63.74% in 2024.
- Unlike the smaller Halo Equity Fund, the Frontier Fund has a higher NAV of N446.031 billion, giving it a stronger footing in the market. With 2,466 unit holders, it enjoys a broad investor base, reducing the risk of large outflows.
- However, its bid-ask spread of N9.70 suggests that investors still face some costs when buying and selling. While this spread is not excessive, frequent traders may need to factor it into their overall return calculations.
- The fund is managed by SCM Capital Limited. SCM Capital Limited, formerly known as Sterling Capital Markets Limited, has a strong presence in the Nigerian financial market.
They offer a range of services, including asset management, capital issues, financial advisory, and structured finance
Guaranty Trust Equity Income Fund
A more conservative performer is the Guaranty Trust Equity Income Fund, managed by Guaranty Trust Fund Managers, a subsidiary of GTCO.
- It posted a 6.16% YtD return in January 2025, following a 23.31% return in 2024.
- While the yield is lower than the top two funds, its NAV of N641.688 billion, which accounts for 1.9% of the total equity-based fund market suggests an advantage.
- The fund’s low bid-ask spread of 0.03 makes it highly liquid, reducing costs for investors looking to enter or exit.
- With 479 unit holders, the fund benefits from a relatively stable investor base. Though smaller in number compared to the Frontier Fund, it provides a balance between exclusivity and market diversification.
Stanbic IBTC Aggressive Fund (Sub Fund)
The Stanbic IBTC Aggressive Fund, another well-established fund, delivered a 4.69% return in January 2025, following an impressive 47% YtD return in 2024.
- This suggests that while its short-term returns were moderate, the fund has the potential for higher long-term gains.
- With a NAV of N800.123 billion (2.38% of the equity-based fund market), it has a significant market presence.
- However, its bid-ask spread of N108.67 is notably high, indicating potentially costly liquidity for investors who frequently trade fund units.
The management by Stanbic IBTC, a highly reputable asset manager, adds credibility and investor confidence.
Meristem Equity Market Fund
Rounding off the top five is the Meristem Equity Market Fund, managed by Meristem Wealth Management Limited.
- With a YtD return of 4.56% in January 2025 and a 37.21% return in 2024, it has demonstrated consistent, long-term growth.
- Its NAV of N896.426 billion (2.66% of the total market) makes it one of the larger funds, signaling strong investor trust.
Moreover, a low bid-ask spread of 0.08 ensures good liquidity and minimal transaction costs. With 419 unit holders, the fund maintains a reasonable level of investor diversification, reducing volatility risks.
Key takeaways for investors
The Securities and Exchange Commission (SEC) valuation reports provide investors with crucial insights into the performance of equity-based collective investment funds.
While past performance does not guarantee future results, it offers valuable trends that investors can analyze.
- For risk-tolerant investors, high-return funds like Halo Equity Fund and Frontier Fund may be appealing, despite the potential volatility.
- For those seeking stability with reasonable returns, funds like the Guaranty Trust Equity Income Fund and Meristem Equity Market Fund offer a more balanced approach.
- Ultimately, each investor must assess their risk appetite, investment horizon, and liquidity needs when selecting the right fund.
