Is ETFs the Investment Destination for Investors in 2020?

Is ETFs the Investment Destination for Investors in 2020?

The 2019 financial year had come and gone and it left a sour taste in the mouth of investors as the Market was
down 14.60% the second consecutive loss in two years. In the last couple of years there had been much talk
about Exchange Traded Fund (ETF) and how investors can rally around it to reduce their portfolio volatility and
to a large extent enjoy some measures of profit. 

Although there had been paucity of data as regards the ETF in Nigeria as the awareness is still in the early stages
and the public perception is still with so much vagueness. However, new Funds continue to come to the Market
in a view of providing investors with options, in this report we would only consider those that had been around
for a minimum of 9 months or more, and compare their performances with the ASI and other ETFs with the
time frame based on data availability.

Meristem and Afrinvest launched two of such last March and interestingly they traded on every trading day
since they came on board. Below is the list of ETFs and the number of times they traded, using March 13, 2019
as the base day.

ETF	No of Day Traded	Percentage of days traded
Meristem growth	197	100
Vetiva Griffin	70	35.53
Meristem value	197	100
Vetiva Industrial	43	21.83
Afrinvest Dividend Yield	196	100
Vetiva Goods	47	23.86
Stanbic 30	22	11.17
Lotus Islam	197	100
Afrinvest Bank	196	100
Vetiva Bank	52	26.40

From the table it is easily observed that 50% of the ETFs considered are not very liquid, this is a major concern
for a retail investor that desires an easy entry and exit from the Market without being noticed. The managers
of the illiquid funds should do more in sensitizing investors and consider what the others that traded on every
trading day of the year did differently in order to really provide that alternative. 

ETFs Returns Vs Market Return 

The daily log return graph of the ETFs vs the ASI and NSE30.

The graphical representation of daily returns of the 10 ETFs considered in this report. It is obvious that all the
funds achieved one of the major advantage of ETFs which is less volatility against investing directly in the underlying assets. Also consider below are the return distributions of all the ETFs, with ASI and NSE30.

Basic Statistics

            Merigrowth  MeriValue Afr.Div.Yield StanbicEtf    VetBank

nobs        196.000000 196.000000    196.000000 196.000000 196.000000

NAs           0.000000 0.000000      0.000000 0.000000 0.000000

Minimum      -0.030278 -0.061291     -0.039879 -0.105314 -0.105090

Maximum       0.049292 0.077699      0.060460 0.095310 0.095310

1. Quartile  -0.005322 -0.009268     -0.006623 0.000000 0.000000

3. Quartile   0.003131 0.008158      0.007165 0.000000 0.000000

Mean         -0.000551 0.000031     -0.000075 -0.000578 -0.000756

Median       -0.001248 -0.000007     -0.000141 0.000000 0.000000

Sum          -0.107903 0.006068     -0.014608 -0.113329 -0.148130

SE Mean       0.000741 0.001125      0.000901 0.000938 0.001474

LCL Mean     -0.002012 -0.002189     -0.001852 -0.002427 -0.003664

UCL Mean      0.000911 0.002251      0.001703 0.001271 0.002152

Variance      0.000108 0.000248      0.000159 0.000172 0.000426

Stdev         0.010372 0.015756      0.012615 0.013126 0.020642

Skewness      0.722802 0.478266      0.515447 -0.811101 0.100853

Kurtosis      3.104086 3.368773      3.383574 40.170869 9.754683

                Vetiva  VetIndEtf   VetGoods LotusIslam    AfrBank NSE30

nobs        196.000000 196.000000 196.000000 196.000000 196.000000 196.000000

NAs           0.000000 0.000000   0.000000 0.000000 0.000000   0.000000

Minimum      -0.105283 -0.078650  -0.070799 -0.033315 -0.061682  -0.019545

Maximum       0.095240 0.078273   0.067793 0.031678 0.072920   0.042572

1. Quartile   0.000000 0.000000   0.000000 -0.006075 -0.006967  -0.005177

3. Quartile   0.000000 0.000000   0.000000 0.003036 0.006432   0.002524

Mean         -0.000957 -0.000987  -0.001064 -0.001083 -0.000108  -0.000916

Median        0.000000 0.000000   0.000000 -0.000757 -0.001037  -0.001770

Sum          -0.187662 -0.193539  -0.208584 -0.212236 -0.021080  -0.179455

SE Mean       0.001553 0.000955   0.000970 0.000700 0.001065   0.000589

LCL Mean     -0.004021 -0.002871  -0.002977 -0.002462 -0.002208  -0.002076

UCL Mean      0.002106 0.000896   0.000848 0.000297 0.001993   0.000245

Variance      0.000473 0.000179   0.000184 0.000096 0.000222   0.000068

Stdev         0.021748 0.013368   0.013576 0.009793 0.014913   0.008240

Skewness      0.504423 -0.752380  -0.601159 0.230854   0.745134 1.114648

Kurtosis     10.361791 19.440045  10.440022 2.173059 5.902738   4.401647

                   ASI

nobs        196.000000

NAs           0.000000

Minimum      -0.022484

Maximum       0.036175

1. Quartile  -0.004356

3. Quartile   0.001541

Mean         -0.000794

Median       -0.001545

Sum          -0.155572

SE Mean       0.000537

LCL Mean     -0.001852

UCL Mean      0.000265

Variance      0.000056

Stdev         0.007515

Skewness      1.087759

Kurtosis      4.873418

It is worthy of note that only the Meristem Value ETF had a positive return within the period under review. It
returned 0.60%. This is like a one eyed man in the midst of the blinds. The bench mark index outperformed the
likes of Lotus Islam ETF, Vetiva Goods ETF, Vetiva Industrial ETF and Vetiva Griffin ETF thatb returned (21.22%),
(20.85%),(19.35%) and (18.77%) respectively. While on the order hand the following ETFs had negative returns
but only better than the bench mark index in terms of magnitude: Afrinest Bank ETF, Vetiva Bank ETF, Stanbic ETF,
Afrinvest Dividend Yield ETF and Meristem Growth ETF, with returns of (2.11%), (14.81%), (11.33%), (1.46%) and
(10.79%) respectively.

Which way for Investors this year?

ETFs may not have provided the silver bullet in 2019 for investors, but a mix of very liquid ETFs among the ETFs
considered so far and some quality stocks base on last nine month performance annualized may be the magic
wand to navigate the investment terrain in 2020.