Research report tasks investors on investment based on naira risk-free fixed-income

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FILE PHOTO: A general view of a food market after Nigeria's President Muhammadu Buhari called for a lockdown starting tonight to limit the spread of coronavirus disease (COVID-19), in Lagos, Nigeria March 30, 2020. REUTERS/Temilade Adelaja

By Chinyere Joel-Nwokeoma

Lagos, July 13, 2020 Coronation Asset Management has published a report on the Nigerian investment landscape which stressed the need for investors to increase their understanding of invesment risks to enhance returns.

Mr Guy Czartoryski, the Head of Research at Coronation Asset Management, said this on Monday at a virtual meeting.

He said that investors needed to increase their understanding of investment risks to enhance returns.

Czartoryski said the revolutionary report titled ‘Navigating the Capital Market: The Investors’ Delimma’ studied the Nigerian investment scene over a 10-year period.

According to him, Nigerian investors are faced with difficult investment choices following the unprecedented crash in interest rates.

He said that investors were left with the alternative of either waiting for rates to rise again in future or to accept more risk in order to increase returns.

“Navigating the capital market takes a new approach to setting investment return benchmarks. Instead of targeting inflation which is the conventional benchmark.

Investors should aim to beat the effects of naira devaluation against the U.S dollar and obtain the risk-free return they would have in U.S dollars.

“This suggests that they should ask for naira risk-free fixed-income (or Treasury bill) return of 14.7 per cent per annum over the long term.

“When it comes to equities, Coronation Research calculates that Nigerian investors should demand a return of 20.5 per cent per annum,” Czartoryski said.

He said that these were high benchmarks, but showed what was necessary to preserve the value of investors hard-earned money.

He said that coronation research investor feedback showed that Nigerian investors had two concerns.

“The first is inflation, the second is not to lose money in investment schemes.

“And with fixed-income and bank deposit rates at record lows and far below the rate of inflation at 12.4 per cent, investors are being tempted to take risks again,” he said.

According to him, the priority remains how to understand what those risks are and how they can be managed.

He said that by navigating the capital market, the report would enhance investors knowledge of risks in a challenging times.

“The revolutionary report studies the Nigerian investment scene over a 10-year period and finds how people 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 Federal Government Treasury Bills.

“However, with the crash in interest rates in the first half of the year, this era has come to an abrupt end.

“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.”

Coronation Asset Management Limited, incorporated on Oct. 2, 2015, is registered with the Securities and Exchange Commission (SEC) to provide funds and portfolio management services to institutions and individuals.

It offers full-fledged investment services across various asset classes to the entire spectrum of investors – major institutions, smaller niche institutions and corporates, public sector family offices, cooperatives and rich individuals.

Its services include fund solutions (money market fund, fixed income fund and balanced fund), portfolio management, advisory services as well as fund administration and trustee services offered through its subsidiary, Coronation Trustees Limited.

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