Investors in the Nigerian capital market have been urged to take advantage of the opportunities inherent in investing in Exchange Traded Funds.

Market experts who stated this noted that there were a lot of benefits of investing in the NewGold Exchange Traded Funds, as it would help to diversify risks and deepen the market.

For instance, the Chief Executive Officer, NSE, Mr. Oscar Onyema, noted that ETFs had a history of churning out good returns to investors in other climes.

He added that those funds were necessary for the growth of investors’ wealth, as it would allow both individual and institutional investors direct access to an efficient and cost- effective way to invest in the funds.

He noted that the ETF, which is the first of the new products planned by the NSE as part of the on-going transformation of the capital market, would also help to make the Nigerian market attractive to foreign investors.

“The ETF is anticipated to help advance the investor market in one of Africa’s fastest growing economies by broadening the choice of asset classes open to local investors and increase appreciably, the liquidity on the Nigerian Stock Exchange”, he stated.

Last December, a total of 400,000 units of the NewGold ETF was admitted on the daily official list of the Nigerian Stock Exchange as part of moves to deepen activities and drive capital market growth.According to the analysts, trading in the commodity will help to diversify their portfolio, as well as ensure that risks were adequately spread.

Analysts from Meristem Nigeria Limited, noted recently, that in countries such as South Africa, ETFs recorded good annualised returns, adding that this was because gold remained a safe haven for investors.

They said, “Understandably, the financial crisis of the past couple of years made gold a safe haven. Hence, ETFs with gold as underlying asset performed considerably well. For instance, Gold ETF in South Africa had one-year annualised return of 41.60 per cent, two-year return of 28.50 per cent and a return over three years of 12.73 per cent.

“Currently there are 4,200 Exchange Traded products listed globally with European and American products jointly accounting for 89 per cent of assets under management. Canada and Asia hold three per cent and six per cent respectively.”

They said, “Trading in NewGold ETF gives Nigerian investors the opportunity to indirectly trade the gold commodity, as the locally-listed ETF’s price will react to the price movement of gold in international markets.

“Generally, ETF is perceived as an entry into emerging markets as it grants access to a basket of stocks in a single transaction.”

Source: Punch/Udeme Ekwere