‘How to leverage ETP towards attracting more investment’

Experts at the just-concluded, Exchange Traded Products (ETP) Conference 2018 in Lagos, have urged market regulators to step up enlightenment campaigns to attract more retail investors, and boost market liquidity given the benefits of ETP in stock exchanges.
This is just as government is urged to create a framework and expand platforms for the Pension Fund Administrators (PFAs) to invest in infrastructure, to bridge current deficits and not directly into the market.

The experts said ETPs provide investors with the opportunity to diversify their investments, and gain exposure to various investment strategies and asset classes.

ETPs are securities that track the performance of an index or basket of assets, which are listed on an exchange much like stocks. ETPs derive their performance from the index or underlying assets they track.

The experts argued that a lot needed to be done to stimulate investors’ appetite and knowledge of ETP, noting that these assets provide many portfolio benefits, such as low correlation to financial assets, out-performance in a rising rate environment, exposure to commodities and total return potential.

Furthermore, they said increased retail investors’ participation in ETP would create a large pool of competing portfolio, which would ultimately improve market liquidity in a sustainable manner.

The Chief Executive Officer, the Nigerian Stock Exchange (NSE), Oscar Onyema, had described ETPs as one of the most significant financial innovations in recent decades that have shaped the financial markets.

On how to woo more retail investors to the instrument, the Managing Director of Greenwich Asset management Limited, and President, Fund managers Association of Nigeria Dayo Obisan, said there is a need to address the regulatory aspect of ETF to make it more attractive to issuers, noting that “cost of creating the product could become more burdensome when you are not sure of the income coming from it.”

The Executive Director, Stanbic IBTC Asset Management Limited, Shuaib Audu, said as one of the issuers in the ETF market, experience has been challenging, as retail and institutional investors’ interests have been low.

As such, he called for market re-jigging to boost operational vibrancy, adding that there is a need to establish a market-making framework for ETF to drive volume and value.

He also stressed the need to establish securities lending for the market as well as enhancing regulatory framework for the Pension Fund Administrators (PFAs) and insurance companies to be able to invest in ETF.

The Managing Director, Meristem Wealth Management Limited, Sulaiman Adedokun, in an interview with The Guardian had argued that if every PFA invested in short-term products like treasury bills, investors seeking better investment returns would not accomplish such objective.

According to him, massive investment in infrastructure would enhance economic performance, and increase the purchasing power that will drive more investment into the pension fund.

“Government needs to create an enabling environment, create investment education for the general populace. These are pensioners and many of them are for a long term; we should look for a way of investing in a long-term project that will deliver both for the economy and for the investor.”

He continued: “With the size of our pension fund, we should not have much problem with infrastructure development because the more we invest in infrastructure, the more the economy will develop; and it would have much spill over effect on the economy.”

Also, the Managing Director/Chief Executive Officer, Crusader Sterling Pension, Niyi Falade, while speaking during a panel session for PFAs, had advised government to focus more on expanding the scope of the pension fund, because retail investors opted to invest in the capital market through the fund.

He noted that the participation of PFAs was still quite low, adding that advocacy strategies are needed to attract more investors.