A mutual fund is a scheme that pools funds or money from various investors and then uses the pooled funds to invest in different asset types on behalf of the many investors from whom the funds had been pooled. In most cases, the investor knows that he or she is invested in one mutual fund or the other, without knowing exactly what the mutual funds invest in. In that case, mutual funds can be aptly described as pass-through entities.
Pass-through entities are legal entities or businesses that pass all of their income to the investors or owners.
It is, however, important for investors to know what their funds are invested or being invested in as that information helps investors gauge the suitability of a given mutual fund and if such mutual funds are in alignment with the investor’s risk profile or risk tolerance. In most countries, mutual fund companies are required to inform investors of what the funds are investing in by disclosing the same on their factsheets or other materials issued to investors. Knowing what your fund invests in helps you know if those positions are in line with your investment philosophy, objectives, and strategy.
Unfortunately, in the Nigerian mutual fund space, information about the top holdings of mutual funds is not readily available. After spending over three hours, I came face to face with some of the frustrations investors face when researching mutual funds in Nigeria. After over three hours, I could only find few factsheets or materials about what Nigerian mutual funds invest in. Because of how time-consuming the search is, I have decided to publish them as I discover the information. Here is the first part of the publication.
As of June 2021, the Valualliance fund had 27.42% exposure to the banking sector, 9.87% to Agriculture, 7.23% to Oil and Gas, 4.12% to Insurance and 3.14% to Industrials.
To be specific, the fund’s top 5 holdings include Zenith Bank, Seplat, Okomu, Presco and Guaranty Trust Bank.
The Vetiva Banking ETF
According to the October 31, 2021 factsheet, the Vetiva Banking ETF invests in Guaranty Trust Bank, 31%, Zenith Bank, 29%, Access Bank, 12%, UBA, 11%, Ecobank Transnational (ETI), 6%, UBN, 5%, Fidelity Bank, 3%, and 1% in each of Sterling Bank, Wema and Jaizbank. Understandably the Vetiva Banking ETF invests only in the banking sector of the economy.
The Vetiva Griffin 30 ETF
Per the October 31, 2021 factsheet, the Vetiva Griffin 30 ETF invests in Dangote Cement, 23%, MTN, 20%, Guaranty, 18%, BUA Cement 14%, Nestle, 6%, Zenith, 5%, Stanbic, 5%, WAPCO, 2%, Seplat,2%, and Nigerian Breweries, 2%.
The Vetiva S&P Nigerian Sovereign Bond ETF
The Vetiva S&P Nigerian Sovereign Bond ETF, invests in FGN 14.20% Mar 24s Bond, (15.92) %, FGN 13.98% Feb 2028 Bond, (14%), FGN 16.2884% Mar 27 Bond, (12.48%,) FGN 12.40% Mar 36s Bond, (11.63%), FGN 16.39% Jan 22s Bond, (11.14%).
The Vetiva Consumer ETF
Per the October 31, 2021 factsheet, the Vetiva Consumer ETF invests in Nestle, 48%, Nigerian Breweries, 18%, Dangote Sugar, 9%, International Breweries, 6%, Flourmills, 5%, Unilever, 4%, Guinness, 3%, NASCON, PZ, and Honey Flour, 1% each.
What this means to you
Now that you know what the funds invest in, it becomes easier to know which fund to invest in to get the exposure you desire. For example, if you want to invest in bank stocks, the Vetiva Banking ETF will be the best bet, but if you want a stable and conservative investment that provides constant and assured cash flow by way of dividends, and if you want exposure to FGN bonds, the Vetiva Nigerian Sovereign Bond ETF may be the best option. If you want exposure to different sectors of the economy, the Vetiva Consumer ETF may be good, but looking at the holdings, you can see that it is well diversified as the fund has 50% exposure to Nestle.
Knowing what a fund or funds holds not only helps you know if the fund is good for your investment objectives, but it also helps you know the extent of diversification in the fund. Again, if you are or intend to invest in more than one mutual fund, knowing the holdings in those funds will help you know if you will be overexposed to a particular company or sector. For example, if you invest in Valualliance fund and the Vetiva Griffin 30 ETF, you would be overexposed to Zenith and Guaranty Trust Banks as both funds hold those.