We are currently processing our Equity and Money Market Funds, which would be launched as soon as we get all regulatory approvals.
LEAD INDEX TRACKER
The Lead Index Tracker comprises of selected 25 Nigerian equities based on certain criteria that is expected to allow for the delivery of superior returns to investors. The Index Tracker is not a fund but a passively managed portfolio and would require periodic rebalancing depending on the dynamics of the Nigerian stock market.
THE GENERAL CRITERIA FOR SELECTION OF STOCKS
Stocks that constitute the Lead Index Tracker are prequalified for selection provided they meet two or more of the following criteria:
The total average daily volume traded in the stock market, between January and September 2013 is above 475,000 units. Average daily trades range from above 25,000,000 units for the most liquid stocks to less than 100,000 units for the least liquid stocks. The cut-off for qualification in terms of liquidity is an average of 475,000 units per day. However, some stocks that did not qualify under this criterion were selected based on other considerations such as good dividend payout, growth prospects and portfolio diversification.
Price to Earnings Ratio
Average market trailing PE, at the time of stock selection was approximately 14.5x. For the banking and insurance sectors, average sector trailing PE was under 7.0x while the average industry PE for say the consumer goods sector was 28.0x. Stocks were therefore, selected based on their sector PE average which could be either higher or lower than the average market PE.
Return on Investment (capital appreciation + Dividend payment)
This includes potentials for capital gains and dividend yield on the chosen stock. Stocks that have the potential of closing the year with 20% capital gains and can deliver a dividend yield of between 5-8% are considered as stocks with acceptable level of returns. However, a few stocks that were shy of these standards were also considered due to their future outlook for growth.
Other reasons considered include price to book multiples, particularly for banking stocks and sensitivity to market sentiments. Stocks that have traditionally paid bonus shares seem to receive positive sentiments from the market, and as such ignite monumental rallies. Investment in such stocks though, could be speculative in nature, but are considered if other criteria are met.
Asset allocation is primarily based on the market capitalization of each stock. However, the Lead 25 index tracker does not exactly mirror the NSE-ASI. The weighting has been adjusted to allow for a more balanced portfolio, unlike the NSE-ASI which is heavily skewed towards banking stocks and a single cement stock (Dangote Cement) in particular, which accounts for 25% of total market capitalization.