The collective scheme

Mutual Funds fall under the group called collective investment schemes.  They are mutual because you team up with others who share similar investment objectives. They are collective because your Fund Manager will invest your pooled funds together in a collection (carefully selected mix) of investment vehicles (fixed income, shares, commercial paper, certificates of deposits etc.) with the view to maximizing and “gaining positive returns” on your investment.

Generally, interest rates on savings accounts, averaged at about 10.4% at end September, 2017 by the Bank of Ghana (BoG), are unable to beat inflation at a current rate of about 12.2%. So right from the onset, the purchasing power (value) of your funds hidden in a saving account is eroded by inflation.

Mutual Funds which invest in the money market, for instance, seek to beat this risk for you by benchmarking the 91-day Treasury Bill (T-Bill) rate currently at about 13.3%. And because your funds are also invested in a collection of carefully selected investment vehicles with different, and higher return profiles than the T-Bill benchmark rate, the fund manager will do well to beat the benchmark rate, plus a descent margin, all other things being equal.

Mutual Funds are either closed or open ended. Classifying them into either money market (short term or within one year) or capital market (long term or over one year) informs the decision as to which vehicles they will be invested in, either fixed income, equities or a combination of both, and what to benchmark them at, either the 91-day Treasury Bill, the stock exchange or a particular well known market index, like the Ghana Stock Exchange Composite Index (GSE-CI).

In this presentation, we provide a case study, using IDEAL SIKA FUND, a money market mutual fund which was launched in March, 2017.

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KEY FACTS: IDEAL SIKA FUND
B.        FUND PERFORMANCE

 

§  Fund Manager                              Ideal Capital Partners

§  Fund Name                                    Ideal Sika Fund

§  Inception Date                              9th March 2017

§  Base Currency                              Ghana Cedis

§  Bid Offer                                        GHS 0.2000

§  Offer Price                                    GHS 0.2252  (as at 31 Oct ,17)

§  Current Value                               GHS 1,080,175.84

§  YTD                                                 12.60%

§  Annualized Yield                          19.22%

§  Minimum Initial Investment      GHS 50.00

§  Regulator                      SEC, Ghana

§  Custodian                      CAL Bank Ltd

§  Management Fee        2.5% per annum

  • FUND SUMMARY

 

  1. THE FUND’S INVESTMENT OBJECTIVE

Ideal Sika Fund is a money market fund with the objective of preserving capital, offering competitive returns and providing liquidity to meet short-to medium term financial needs. The Fund will invest in a diversified portfolio of fixed income securities and other high quality money market instruments with maturity period of not more than 1 year.

 

  1. THE FUND’S STRATEGY

The Fund seeks to achieve its investment objective by investing primarily in a portfolio of high quality money market securities in order to reduce investment risk through diversification.

 

  1. ASSET ALLOCATION & YEAR TO DATE (YTD) PERFORMANCE
§  KEY FACTS: From its inception in March, 2017, Ideal Sika Fund has recorded an annualize yield of 19.22%. This compares favourably with the benchmark 91-Day T-Bill of 13.32% and the 182-Day T-Bill rate of 13.82%. It is also above the 1 year Government of Ghana Treasury bill rate of 15% and inflation which currently stands at 12.2% as at September, 2017.

§  Ideal Sika Fund has also recorded a year-to-date (YTD) of 12.60% since its inception or IPO in March, 2017.

§  PORTFOLIO DIVERSIFICATION: There is power in diversification. It is the fund manager’s duty to allocate the funds into the right investment vehicles, pooled mostly in small amounts, from various sources to achieve this desired outcome.

§  FUND ADMINISTRATION: Mutual Fund is a company. The other parties involved the organization and smooth running of this company, or investment vehicle, are the Fund Manager, who must be licensed by the Regulator, and whose duty it is to apply their skills and expertise to achieve suitable diversification and competitive returns for shareholders; and a Custodian (which could be a bank or insurance company) who has oversight over the prudent use of your funds and also ensure that the benefits of diversification are achieved in accordance with the Funds objectives.

§  Both the custodian and the Regulator remain firmly positioned in the picture to help you to mitigate your risks through the performance of their various functions, not least ensuring that funds are invested according to plan!

§  THE MARKET: At end June, 2017 there were 34 Mutual Funds registered with the Securities and Exchange Commission (SEC) of Ghana. Also, total Funds Under Management (FUM) for Collective Investment Schemes stood at GHS 1.3 billion as at end March, 2017.

 

 

  • Call our customer care for assistance.

·         Download application forms from our website (www.idealcapitalpartnersgh.com) and fill it.

 

 

Address: No 2 Flower Road, Opposite East-Legon Police Station, Accra.

Customer Care:  0302 541197 / 0302 543436

Email: info@idealcapitalpartnersgh.com

 

The writer, Peter Nii Odoi Charway, is the Head of Research & Strategy at Ideal Capital Partners Limited, a SEC regulated Investment and Asset Management firm engaged in asset/ fund management, corporate finance & advisory services, investments and research.

Location: East Legon, Accra, Ghana.

 

 

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