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Market Slice: How Mutual Funds Performed in February 2021

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Market slice is a monthly summary of mutual funds on Cowrywise and key money news. This jargon-free report is shared on the 3rd of every month. Share lessons on Mutual Funds in February 2021 using the hashtag: #MarketSlice.

Hello there 😄

Would you pay $13,000 for a GIF? They are pretty short animated videos that keep repeating. With the help of non-fungible tokens (NFTs), people are selling GIFs and other artworks for high prices. Why are NFTs a thing and how do they work? There’s an explainer for you in this article, read on. This month’s market slice was written with support from Emmanuel Akehomen. He is the head of portfolio management at United Capital (one of our fund manager partners).

Top Equity Mutual Funds in February 2021

Top Fixed Income and Balanced Funds (NGN)

Top Fixed Income and Balanced Funds (USD)

Money Market Funds on the Rise 🚀

Early 2019, these were the cherished babies of most investors. But as the year drew to a close, their returns started to drop. In 2020, the road got bumpier and some investors decided to explore new routes.

At some point last year, the returns on treasury bills were even negative. We spoke about that here. But in February 2021, they took centre stage with flashing lights. From an average of 1% annual returns to 2%, we can see a clear uptick, with some of them yielding 3%+ per annum. What’s motivating this boost? Emmanuel Akehomen, the head of portfolio management at United Capital has an explainer for this:

The money market funds reflect the performance of the money market which means that what happens in the money market space impacts the returns of money market funds. In the last few weeks, we have seen a steady uptick in the yields on money market instruments such as treasury bills.

» Check This: money market funds invest your cash majorly in treasury bills. They’re great for keeping your capital safe.

Bumpy Bond Ride 🚵🏽‍♂️

2020 was an interesting ride for bond funds. For clarity, these are mutual funds that invest in instruments known as bonds. Some of these funds earned as high as 20% per annum in returns in 2020, but things have gotten bumpier. Emmanuel Akehomen of United Capital says:

The bond market has been quite volatile in 2021, as we have seen bond yields pick up sharply while also moving downward in some weeks. This has created a high level of uncertainty in the market as investors continue to anticipate a clearer direction for the market. However, the bonds funds that are mostly affected are the funds that adopt a marked to market valuation.

» Marked to Market: this means that the value of an asset (a bond in this case) is determined by the current market price. For example, a bond purchased at ₦1 million yesterday can be valued at ₦500,000 today (if that is the market price today). This goes on to affect the returns of the said bond.

That said, investments happen in cycles and they come with highs and lows. This is why our primary advice is a long-term automated plan. That way, you stand a better chance of evening out any losses as you enjoy compound returns.

Some Good News?

A Sukuk bond fund is coming from United Capital. This type of bonds grants ownership to assets, and entitlement to returns earned by those assets. Think of them this way, a Sukuk bond is set up to raise cash for the building of a mall. Holders of that bond will earn returns from the rent paid by shop owners in the mall.

In essence, United Capital Sukuk fund will pool your funds with others and invest them in Sukuk bonds. This type of fund is fit for anyone to invest with, regardless of their faith. Want a slice? It gets launched in two weeks on Cowrywise.

$4 Million for digital art? Say Hello to NFTs 🤑

NFT stands for non-fungible token. That is, something that is one of a kind. Prior to NFTs, anyone could lay claims to digital assets. However, with this there is now a global record system for proof of ownership. So, even if you take a screenshot of digital painting all you’ll have is a copy and not the original.

In essence, when a digital asset like a unique GIF is created it can be sold as a non-fungible token. Once purchased, your details are entered in a public ledger (read as record book) as the owner. But why would anyone want to own an animation that can be downloaded by another person? The prestige of ownership

Do you know anyone offering classes on digital arts? Sign me up! Anyway, it is believed that NFTs will help redefine ownership of digital assets and intellectual property. Find an example of a non-fungible token that was sold for $4 million below.

📸 Data Snap of the Month

Nigerians use 500 million condoms annually. 🌚
[Source NOI Polls & AIDS Healthcare Foundation]

Your favourite advisor,
Ope 💙

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