Databank fund markets in low yields

Mutual investment fund, Epack, has made a strong comeback posting a total return of 17.31 per cent in 2012 driven mainly by the strong performance of African stock markets including Ghana.

The fund bounced back from a poor 2011 showing to close at GH¢1.0291 per share in 2012, up from the GH¢0.8773 recorded in 2011.

The fund gained 17.31 per cent in cedi terms but actually lost some negative 1.4 per cent in dollar terms, which the Executive Chairman, Keli Gadzekpo attributes to the depreciation of the cedi in 2012.

This reflects the impressive performance of most African stocks markets including Ghana, particularly in the last quarter of 2012.

While Epack’s exposure to Malawi and Mauritius reduced on the back of currency weakness, its holdings in Nigeria surged up 165 per cent due to a combination of stock purchases of 39 per cent increase and share price rallies.

Again, the fund’s holding in the banking sector also surged to 53 per cent despite the profit taking undertaken during the year.

Epack has so far posted a cumulative return of 10.191 per cent since its inception 16 years ago compared to the Ghana Stock Exchange 2330 per cent.

As at December 2012, the fund had invested in 11 stock markets in Africa and is expected to concentrate on sectors with strong fundamentals.

In 2012, the number of Epack shareholders decreased to 79,826 from 83,097 shareholders in 2011. The fund’s assets increased from GH¢52 million in 2011 to GH¢54 million in 2012.

Over the years, Epack invested in companies like Fan Milk Ltd (Ghana), Ghana Commercial Bank Ltd. (Ghana), SG-SSB Ltd (Ghana), National Societe General Bank ltd. (Egypt), Enterprise Group Ltd. (Ghana), CRDB Bank Ltd. (Tanzania) Medine Sugar Estates Co. Ltd. (Mauritius), Illovo Sugar Ltd. (Malawi), Press Corporation Ltd. (Malawi).

Last year, Epack invested 59 per cent in Non-Financial Stocks and 41 per cent in Financial Stocks. The investment in Ghana was also reduced to 36.30 per cent and the rest of the funds invested outside.

EPACK is seen by some people as a less risk investment compared to investing directly in the stock market. This school of thought believes that, the risk is shared by all Epack investors just as all other mutual funds.

Balance Fund

The Balanced fund, which is cedi investment medium to long-term fund, has also recorded an annual return of 16.8 per cent, up from the 7.35 per cent it recorded in 2011.

The fund closed the year with a total of 6,233 shareholders. The fixed income market is expected to return considerable gains as interest continue to remain high in the first quarter of 2013.

The fixed income market is expected to return considerable gains as interest rates continue to remain high in the first half of 2013. It is against this background that market watchers expect the BFund to create sustainable wealth for its shareholders.

Ark Fund

Ark Fund on the other hand rode on the back of increased stock returns and interest rates in 2012 to record a return of 16.39 per cent in 2012. This was an improvement over the 2011 return of 5.88 per cent.

The fund ended the year with assets under management worth GH¢2.6 million. The total number of shareholders of the Ark fund also increased by 493 shareholders.

This return hovered in the single digits as investors interests were diverted to the fixed income market which was witnessing a hike in the yields.

The benchmark treasury yield increased from 11 per cent at the beginning of the year to close the year at 23 per cent. This was a result of the government’s efforts at stemming further declines on the cedi which had depreciated 16.6 per cent by year end.

In the last quarter of the year, however, the market witnessed significant improvements as price hikes on some stocks made it possible for the index to close at 23.81 per cent. The sharp depreciation of the cedis, 16.6 per cent however minimized the returns in US$ terms to +4.07 per cent.

Money Market Fund

During the year under review, the base rate inched up, which resulted in rising interest rates. Databank Mfund closed the year at an annualized yield of 14.81 per cent an improvement over the 2011 yield of 12.18 per cent.

Unfortunately, the return of the Mfund was lower than the average annual yield of the 91-treasury bill of 18.63 per cent.

Mfund’s yield was low due to the fact that in 2012, T-bill rose from 10.81 per cent at the beginning of the year to 12.61 per cent in March, 22 per cent in June and 23 per cent in September 2012.

The Mfund in March had about 79 per cent of its portfolio investment in securities that had yields of between nine and 15 per cent, which had to mature before shareholders get high rates.