Zenith Bank Mutual Funds

[Apache]

Originally Posted by Apache

Guys, while we are still trying to understand the incentive thing, I will advise that if you want to enter this mutual fund, you will get a better deal buying into the fund when they have just listed than buying it now.
Taking a cue from the just listed ARM aggressive groeth fund and the IBTC ethical fund when they were listed, you would have noticed that these funds were listed below the offer price. This is because by the time the cost of raising the funds etc are deducted from the fund, it gives it a lower NAV (Net asset value) at the time of listing. (Note that this is not illegal).
Therefore, if you buy now, you will be incurring the cost of raising money for this offer, but if you buy post listing, you will get a better bargain.
Note that the time for entering the fund post listing is when they have just listed. if you buy way after they have listed you might/might not get the price advantage (depending on whether the market is bullish or bearish).

Just to buttress my point above, I was just looking at the prospectus for the ethical fund. if you look at pg 3 where they have the yield forecast for the periods ended...., you will see that the NAV for the beginning of the year 2008 (which translates to when they list) is =N=956,500,000. If you divide this figure by the 100 million units on offer, you will get a price of =N=9.56. this is what the price is going to be when they list. So why buy it for =N=10 now when you can buy it for =N=9.56 when it is eventually listed.
It actually took the AGF fund to open my eyes to this

[hispy99]

Originally Posted by Apache

Just to buttress my point above, I was just looking at the prospectus for the ethical fund. if you look at pg 3 where they have the yield forecast for the periods ended...., you will see that the NAV for the beginning of the year 2008 (which translates to when they list) is =N=956,500,000. If you divide this figure by the 100 million units on offer, you will get a price of =N=9.56. this is what the price is going to be when they list. So why buy it for =N=10 now when you can buy it for =N=9.56 when it is eventually listed.
It actually took the AGF fund to open my eyes to this

Good point, but however note that you are always going to buy at the ASK, not the BID (which is what is used in computing NAV; just checked my IBTC fund now and NAV was determined using the BID price). I looked at 3 funds and the BID/ASK spread as of today was 2.6% (Legacy), 2.82%(ARM Discovery) and 3.98% (IBTC Equity Fund). So if you use a 3% spread, the price of the Zenith fund comes to like N9.84...if you use 4% (similar to IBTC), you have a price of N9.94

[isioma]

Hi!
Having gone through all the comments i would like to chip in my own views. I had the intention of investing in the Zenith Funds myself and based on this premise i had a chat with the portfolio managers. From our discussion i discovered that the fees charged are in line with SEC regulations and the whole idea of charging fees is to strengthen the investment platforms such as equiping the research team, updating IT infastructure e.t.c which would contribute greatly to ensuring that the right decisions are taken to yield high returns to investors. I also observed from the comments made on this forum that there is a comparism being made between IBTC and Zenith Funds.However,IBTC just reviewed their funds in line with SEC regulations and also charge an incentive fee of 30% above 10% returns. I also discovered that the portfolio managers in Zenith have vast experience both locally and internationally and made immense contributions to the success of some funds such as the IBTC and Coral Growth Fund just to mention a few. I believe strongly that they have a lot to offer based on their track record. Last year they gave a return of 86% net of fees, while the NSE index gave a return of 75% thereby outperforming the index. I think i will go for it!

[hispy99]

Originally Posted by isioma

Hi!
Having gone through all the comments i would like to chip in my own views. I had the intention of investing in the Zenith Funds myself and based on this premise i had a chat with the portfolio managers. From our discussion i discovered that the fees charged are in line with SEC regulations and the whole idea of charging fees is to strengthen the investment platforms such as equiping the research team, updating IT infastructure e.t.c which would contribute greatly to ensuring that the right decisions are taken to yield high returns to investors. I also observed from the comments made on this forum that there is a comparism being made between IBTC and Zenith Funds.However,IBTC just reviewed their funds in line with SEC regulations and also charge an incentive fee of 30% above 10% returns. I also discovered that the portfolio managers in Zenith have vast experience both locally and internationally and made immense contributions to the success of some funds such as the IBTC and Coral Growth Fund just to mention a few. I believe strongly that they have a lot to offer based on their track record. Last year they gave a return of 86% net of fees, while the NSE index gave a return of 75% thereby outperforming the index. I think i will go for it!

Someone needs to be fired in the SEC if this is acceptable, just my 2 cents

[zainabusman]

Originally Posted by isioma

Hi!
Having gone through all the comments i would like to chip in my own views. I had the intention of investing in the Zenith Funds myself and based on this premise i had a chat with the portfolio managers. From our discussion i discovered that the fees charged are in line with SEC regulations and the whole idea of charging fees is to strengthen the investment platforms such as equiping the research team, updating IT infastructure e.t.c which would contribute greatly to ensuring that the right decisions are taken to yield high returns to investors. I also observed from the comments made on this forum that there is a comparism being made between IBTC and Zenith Funds.However,IBTC just reviewed their funds in line with SEC regulations and also charge an incentive fee of 30% above 10% returns. I also discovered that the portfolio managers in Zenith have vast experience both locally and internationally and made immense contributions to the success of some funds such as the IBTC and Coral Growth Fund just to mention a few. I believe strongly that they have a lot to offer based on their track record. Last year they gave a return of 86% net of fees, while the NSE index gave a return of 75% thereby outperforming the index. I think i will go for it!

Please refer us to the where we can find information confirming IBTC will now charge an incentive fee of 30%. If it is true i will divest from the fund.

In addition, what is so special about making 86% compared to 75% when you have to relinquish 23% (30% of 76) as incentive? In the end what comes to you as investor is 63% which is less than the market return due to the incentive charge.

If they are really interested in rewarding performance, then any incentive should be based on a comparison on how the fund performed compared to the market. It will be more pallatable if the incentive is calculated as a % of excess performance compared to the market. Eg if the market returned 75% and the fund 86%, then the incentive will be only on 11%.

I cannot pay an incentive for market performance. The fund manager is guaranteed 2%+ of the NAV (which could be huge) as management fee and should not be rewarded for market performance.

[Apache]

Originally Posted by hispy99

Good point, but however note that you are always going to buy at the ASK, not the BID (which is what is used in computing NAV; just checked my IBTC fund now and NAV was determined using the BID price). I looked at 3 funds and the BID/ASK spread as of today was 2.6% (Legacy), 2.82%(ARM Discovery) and 3.98% (IBTC Equity Fund). So if you use a 3% spread, the price of the Zenith fund comes to like N9.84...if you use 4% (similar to IBTC), you have a price of N9.94

@Hispy, you are right. The point is that the offer price is going to be lower than the amount it is going for now hence investoirs have an opportunity to buy at a lower cost than what the offer is going for now.

@Isioma, you might be right there. I was just going through the AGF prospectus and picked up this same line

"The Manager will receive an annual Management Fee not exceeding 1.5% of the Net Asset Value of the Fund
payable quarterly in arrears, subject to subsisting regulations as may be applicable from time to time. The fee
serves as compensation for the Managers’ efforts in the day-to-day management of the Fund’s Portfolio of
investments and for financial planning and advice to the Fund. In addition, the Manager will be entitled to an
annual incentive fee which shall not exceed 30% in excess of 10% of the growth in the Net Asset Value of the
Fund, subject to any subsisting regulations in relation thereto payable by Unit Trusts that may be applicable at
the time such incentive fee is payable."
It also says the same in the IBTC equity fund (See attachment) so I guess it's a new rule by SEC. @ Zainabusman,If you remember, The IBTC ethical fund was introduced in 2005 hence there might have been some changes to the rule that we were not aware of.
In terms of who this will be effected, I think it's already factored into the bid price for any day.
So no problems here.

[hispy99]

Originally Posted by Apache

@Hispy, you are right. The point is that the offer price is going to be lower than the amount it is going for now hence investoirs have an opportunity to buy at a lower cost than what the offer is going for now.

@Isioma, you might be right there. I was just going through the AGF prospectus and picked up this same line

"The Manager will receive an annual Management Fee not exceeding 1.5% of the Net Asset Value of the Fund
payable quarterly in arrears, subject to subsisting regulations as may be applicable from time to time. The fee
serves as compensation for the Managers’ efforts in the day-to-day management of the Fund’s Portfolio of
investments and for financial planning and advice to the Fund. In addition, the Manager will be entitled to an
annual incentive fee which shall not exceed 30% in excess of 10% of the growth in the Net Asset Value of the
Fund, subject to any subsisting regulations in relation thereto payable by Unit Trusts that may be applicable at
the time such incentive fee is payable."
It also says the same in the IBTC equity fund (See attachment) so I guess it's a new rule by SEC. @ Zainabusman,If you remember, The IBTC ethical fund was introduced in 2005 hence there might have been some changes to the rule that we were not aware of.
In terms of who this will be effected, I think it's already factored into the bid price for any day.
So no problems here.

thank you for this info....next time i am in naija, i am liquidating my IBTC fund. Can't imagine why I should pay anyone 30% as incentive fee for anything. As ZainabUsman mentioned, this incentive fee is not for performance, it's just a fee to be paid if they do better than 10%. Even a johnny just come would have done better than 10% in the last 2 years.

[zainabusman]

Originally Posted by hispy99

thank you for this info....next time i am in naija, i am liquidating my IBTC fund. Can't imagine why I should pay anyone 30% as incentive fee for anything. As ZainabUsman mentioned, this incentive fee is not for performance, it's just a fee to be paid if they do better than 10%. Even a johnny just come would have done better than 10% in the last 2 years.

I never really liked mutual funds but i decided to give them a shot this year. With this new fee structure, i am going to exit.

With this kind of incentive, one should consider funds management.

[Apache]

Originally Posted by zainabusman

I never really liked mutual funds but i decided to give them a shot this year. With this new fee structure, i am going to exit.

With this kind of incentive, one should consider funds management.

One strategy could be to exit the fund before their year end since the incentive is an annual charge.

[hispy99]

Originally Posted by Apache

One strategy could be to exit the fund before their year end since the incentive is an annual charge.

I think we should clarify if this incentive fee will be charged at year end. If it's charged at year end then these guys should employ me so that we can figure out how to charge this fee daily!!! . They are leaving money on the table by waiting till year end

[chokit]

I give a big kudos to you gurus for the way you do justice to investment issues i am really impressed and happy to be on board.My shout out goes to all in the house from the moderators to our indispensible contributors.
Zainabusman,i read your blogposts they are nice and informative.Talking about Zenith mutual fund i am a bit concerned and i do not want to make any mistake by puting my cash into the fund,before the analysis given above my mind is made up to buy into the fund and now it is a bit shaky becuase of the various charges which i am now thinking might not make it more profitable.Do you still feel this worth it at all though i am also looking for a better PP to buy but havent found any please advise.

[zainabusman]

Originally Posted by chokit

I give a big kudos to you gurus for the way you do justice to investment issues i am really impressed and happy to be on board.My shout out goes to all in the house from the moderators to our indispensible contributors.
Zainabusman,i read your blogposts they are nice and informative.Talking about Zenith mutual fund i am a bit concerned and i do not want to make any mistake by puting my cash into the fund,before the analysis given above my mind is made up to buy into the fund and now it is a bit shaky becuase of the various charges which i am now thinking might not make it more profitable.Do you still feel this worth it at all though i am also looking for a better PP to buy but havent found any please advise.

Thanks.

Yes it is a bit confusing to decide with all the analysis in this thread.

If u want to invest, i will advice u wait until they have finished the offer and they beging investing. The reason has been explained by Apache. U gain nothing by investing now.

If u have spare cash, invest it in Zenith bank or some other stock that u think will give u 30%+ return bw now and December. I think Zenith bank is a good buy at N50.

When u exit Zenith bank or whichever stock u invest in, u can then enter the mutual fund if u are still interested by then.

[chokit]

Thank you for your sisterly advise.I shall wait till after the offer if i still need to go in.Your words on Zenith sound okay i shall look towards that may be if i go in early i may be able to enjoy the divdend or bouns shares if declared.

Your write ups on Private placement was execllent i found it usefull because i havent the oppotunity yet to get into one like i have nt done with mutual fund.

[hardrock_niga]

Originally Posted by zainabusman

Thanks.

Yes it is a bit confusing to decide with all the analysis in this thread.

If u want to invest, i will advice u wait until they have finished the offer and they beging investing. The reason has been explained by Apache. U gain nothing by investing now.

If u have spare cash, invest it in Zenith bank or some other stock that u think will give u 30%+ return bw now and December. I think Zenith bank is a good buy at N50.

When u exit Zenith bank or whichever stock u invest in, u can then enter the mutual fund if u are still interested by then.

Zenith should have given people investing now(IPO) some incentives....may be 105%-107% of the NAV if you invest during the IPO and if they keep their investments for up to 2-5years . if they have done this they would have attracted lots of investors. i hope they are reading this...they should check out Mutual funds public offers in the developed countries.

The best time to invest is after the IPO - the bid and offer price will crash. Check out the ARM aggressive growth fund. its going downward and i think will take about 1-2years to get the price(Bid/offer) during the Public offer.