Friday, February 07, 2020 06:35 PM / by NSE / Header Image Credit: NSE
On behalf of the National Council and Management of the Nigerian Stock Exchange (NSE), I welcome you all to the NSE ETF Workshop. This year's workshop themed "Investing in Nigerian Equities: Using Exchange Traded Funds (ETFs) as a proxy" is focused on the benefits of indexing and Exchange Traded Funds in accessing broader investment opportunities in today's equities market.
From its origins in the 1990s, ETF investments were designed to provide users a single security to track an index and trade intra-day. This rapidly growing asset class is radically reshaping the asset-management industry; gradually eclipsing old-fashioned stock pickers given its ability to replicate passive investing styles. The 2008 financial crisis further catalyzed the growth in global Index funds industry with ETFs accounting for 54% of the global asset under management of $11Tn as at November 2019. Its hands off investment approach means lower fees for investors, albeit less control. Asides democratizing investment opportunities, ETFs have continued to gain grounds amongst investors seeking low-cost index-driven or passive management investment alternatives.
It is also noteworthy to mention the growing popularity of ETFs amongst millennials who favor asset classes that offer cost-effective, diversification, tax and social benefits in their investment considerations. A BlackRock survey from September 2016 revealed that 70% of millennials were likely to allocate new investments to ETFs. Likewise, in another survey conducted by Charles Schwab & Co. in June 2017, 56% of millennials described ETFs as their investment vehicle of choice.
ETFs just like other capital market products if properly deployed can also play a role in fostering economic development. Notably, the government of India in 2014 successfully divested minority stakes in ten of its 47 central public sector enterprises via an Exchange Traded Fund, this initiative aided the Indian government in raising funds to meet its fiscal deficit.
The Nigerian market is also fast embracing the usage of ETFs. The supply-side has deepened from a single ETF tracking the price of Gold in 2011 to 10 ETFs currently offering exposure to equities, fixed income, commodities as well as thematic and smart investment solutions. Today the NSE, prides itself in its position as the second largest ETF market in Africa with a current market capitalisation of N6.9Billion. Furthermore, ETF offerings in our market have also provided investors risk management and hedging benefits - the commodities backed ETF returned 31.75% for the year 2019.
With the market witnessing low yields there is an increasing appetite for equities, and ETFs presents investors an alternative channel to maximize investment in equities.
In line with our commitment to develop the market, the Exchange remains resolute in its goal to collaborate with market stakeholders to increase listed ETFs with a view to provide domestic investors international and alternative diversification opportunities.
We are truly pleased to host this event in collaboration with Meristem Wealth Management Limited. This workshop is aimed at creating awareness, increasing knowledge depth to foster adoption of ETFs in Nigeria and present the investing public with smart investing options provided by the Exchange.
We believe that your participation is an indication of your interest in the various options available on the Exchange and thus encourage you to maximize this opportunity.
Thank you for listening and hope you derive as much benefits as you can from the workshop.