November 22, 2017/NSE
The ETF market capitalization grew by 0.91% in October to kick off Q4-2017, closing at N6.44 Billion (up from September levels at N6.38Billion).
| YTD Dashboard as at October 2017 | ||
| No of ETFs | 9 | |
| Market Capitalization (N’Mn) | 6,444 | |
| Deals | 345 | |
| Volume | 59,913 | |
| Value (N’Mn) | 449 | |
Market Activity Review
In the period under review, the Vetiva S&P Bond ETF, Stanbic ETF 30 and Vetiva Griffin 30 ETF were the most actively traded – cumulatively representing 99.5% of total value traded. The Bond ETF continues to enjoy market attention as yields in the underlying Fixed Income Market decline. The ETF’s benchmark – the S&P Nigeria Sovereign bond index – has recorded an 18.96% increase YTD.
| ETF | Oct-2017 | Jan to Oct | INDEX | Oct-2017 | Jan to Oct |
| VETGOODS | -1.94% | 28.71% | NSECNSMR | -0.33% | 28.92% |
| STANBICETF30 | -3.85% | 27.89% | NSE 30 | 3.28% | 40.19% |
| LOTUSHAL1 | 1.71% | 20.34% | NSELOTUS | 3.36% | 25.07% |
| SIAMLETF 40 | 0.00% | 35.19% | NSE Pension | 4.70% | 57.90% |
| VETGRIF30 | 3.39% | 39.92% | NSE 30 | 3.28% | 40.19% |
| VS&P BOND | -4.16% | 7.66% | S&P BOND | 5.01% | 18.96% |
| VETBANK | 4.28% | 65.36% | NSEBNK | 5.33% | 69.05% |
| VETINDETF | 2.36% | 26.85% | NSEINDUST | 2.24% | 27.06% |
| NEW GOLD | 0.00% | 50.38% | GOLD | -1.01% | 9.58% |
On a M-o-M basis, trade values recorded in the ETF market grew 15x, albeit darfing June value traded Figures.
An assessment of the leader board puts the ratio of gainers to losers at 4:3, whilst 2 ETFs closed flat. The baking ETF, Vetiva Griffin 30 ETF (which tracks the 30 most capitalized stocks), industrial goods ETF and the Lotus Halal ETF gained 4.28%, 3.39%, 2.36% and 1.71% respectively.
Also noteworthy is the YTD growth of the Banking and Newgold ETF with recorded gains of 65.36% and 50.38% respectively.
ETF Application in a Core Satellite Strategy
ETFs simply and easily provide diversification benefits as they provide cost-effective, instant and liquid exposure to different markets, asset classes and strategies.
Investors can adopt a core satellite strategy wherein a portion of the portfolio (the “core”) is exposed to various passive outlets or index trackers e.g. Equity or Fixed Income ETFs; and additional positions (satellites) are added to the portfolio in the form of actively managed investments such as stocks, bonds, factor ETFs, mutual funds. The combination of this passive, low-cost indexed “core” and the higher-cost actively managed assets produce diversified portfolios with a higher risk/return potential and reduced portfolio volatility.
For illustrative purposes, the Equities Market Cap, Sector and Bond ETFs listed on The Nigerian Stock Exchange can be utilized as core components of a portfolio whilst diversification benefits can be derived from the Pension, Halal and Commodity ETFs, vice versa.
