Capital Market | |
Capital Market | |
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Tuesday, July 14, 2020 / 1:44 PM / WebTV News / Header Image Credit:
Inflation
and not losing money in investment schemes are two major concerns of Nigerian
investors.
Mr.
Guy Czartoryski the Head of Research, disclosed this at a recent Coronation
Asset Management media parley ahead of the launch of its report "Navigating the
Capital Market: the Investor's Dilemma".
According to him "The revolutionary report studies the Nigerian investment scene over 10 years
and finds how Nigerians have managed to preserve their capital over the long
term. Some of the conclusions are surprising. For example, it has been
remarkably easy to beat inflation over the last 10-years by buying the Federal
Government of Nigeria Treasury Bills. However, with the crash in interest rates
in the first half of 2020, this era has come to an abrupt end".
Speaking further he
said, by contrast, equity market returns have not preserved capital for
investors over the long term, even when adding back the generous dividends paid
to investors. By looking at the internal profitability of stock exchange-listed
companies, 'Navigating the Capital Market' identifies which stocks are the ones
most likely to generate satisfactory returns for their owners, and back-tests
the results.
He admitted that
Nigerian investors face difficult choices, as interest rates have crashed.
Czartoryski noted that the alternatives are either to simply wait for rates to
rise again in the future, or to accept more risk to increase returns.
Giving further
insight he said the report takes the new approach of setting investment return
benchmarks.
"With fixed-income
and bank deposit rates at record lows, and far below the rate of inflation at
12.4%, investors are being tempted to take risks again. Yet the priority now is
for them to understand what those risks are, and how they can be managed" He
said.
Instead of
targeting inflation, which is the conventional benchmark, the Head of Research
recommended a conscious step that investors should take in aiming to beat the
effects of Naira devaluation against the US dollar, and obtain the risk-free
return they would have in US dollars.
"This suggests that
they should ask for Naira risk-free fixed-income (or Treasury bill) return of
14.7% per annum over the long term. And, when it comes to equities, Coronation
Research calculates that Nigerian investors should demand a return of 20.5% per
annum. These are high benchmarks, but they show what is necessary to
preserve the value of investors' hard-earned money" Czartoryski said.
Coronation Asset Management Limited, incorporated on 2
October 2015, is registered with the Securities and Exchange Commission (SEC)
to provide fund and portfolio management services to institutions and
individuals. Coronation Asset Management offers full-fledged investment
services across various asset classes to the entire spectrum of investors:
major institutions, smaller niche institutions & corporates, public sector
family offices, cooperatives and high net-worth individuals.
The Services include fund solutions (money
market fund, fixed income fund and balanced fund), portfolio management
(discretionary and non-discretionary), advisory services as well as fund
administration and trustee services offered through its subsidiary, Coronation
Trustees Limited.
Coronation was recently awarded the Fastest Growing
Fund Management Company in Nigeria at the 2020 Global Banking & Finance
Awards.
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