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ETFs outperform underlying indexes in 2024: An excellent hedge in 2025? 

In 2024, Alternate-Traded Funds (ETFs) on the Nigerian Alternate (NGX) delivered spectacular returns, outperforming their underlying indexes and providing buyers a substitute for particular person inventory investments.

With some ETFs attaining returns as excessive as 116% and a median Yr-to-Date (YtD) acquire of 45% as of December 20, 2024, these funding automobiles proved to be a standout selection.

This efficiency not solely eclipsed the typical YtD acquire of 33% recorded by their underlying indexes but additionally demonstrated the benefits of ETFs: diversification, lowered publicity to particular person firm danger, and the potential for substantial development.

For buyers trying to hedge towards market volatility and capitalize on sector-wide developments, ETFs have emerged as a compelling possibility.

As 2025 unfolds, the query stays: Can ETFs preserve their momentum, and can they proceed to function a dependable hedge in an unsure financial panorama?

This text explores the highlights of ETF performances in 2024, their distinctive advantages, and the potential funding alternatives they current within the 12 months forward.

The ETFs 

These funds embrace the next: Greenwich Alpha ETF, Lotus Halal Fairness ETF, Meristem Progress Alternate Traded Fund, Meristem Worth Alternate Traded Fund, NewGold Alternate Traded Fund, Stanbic IBTC ETF, SIAML Pension ETF 40, Vetiva Banking ETF, Vetiva Shopper ETF, Vetiva Griffin 30 ETF, Vetiva Industrial ETF, and Vetiva S&P Nigeria Sovereign Bond ETF.

Buyers who positioned as little as N100,000 in these ETFs reaped rewards by means of diversification, decrease danger, and important development.

ETFs are funding automobiles that monitor an index, a basket of property, or a commodity however commerce like common shares on the NGX, making them accessible to a variety of buyers.

By decreasing publicity to particular person firm danger, ETFs present a balanced funding possibility for each new and seasoned buyers.

You will need to perceive that ETF costs are decided by market forces, so a purchaser may purchase at a slight premium or low cost versus the Internet Asset Worth (NAV).

Some ETFs could not monitor broadly accepted indices, which can lead to larger prices and better dangers. The secret is deciding on and investing in the suitable underlying indexes that ETFs mirror.

Key ETF Performances in 2024 

Vetiva Industrial ETF: +70% Return 

The Vetiva Industrial ETF, which mirrors the efficiency of the NGX Industrial Index, posted a formidable return of 69.81%, far outpacing the index’s 32% YtD acquire and remaining nicely above the November inflation charge.

This ETF affords publicity to industrial heavyweights akin to BUA Cement, Dangote Cement, and Lafarge Africa, permitting buyers to diversify inside Nigeria’s industrial sector with no need to speculate instantly in particular person shares.

MERISTEM GROWTH EXCHANGE TRADED FUND +75% return 

The Meristem Progress Alternate Traded Fund (ETF) had a stellar efficiency in 2024. Based on the SEC’s September 2024 valuation report, the ETF recorded a acquire of 75%, considerably outperforming the underlying Index’s YtD acquire of 43%.

This spectacular efficiency highlights the potential of the Meristem Progress ETF as a powerful funding possibility.

The fund tracks the NGX Meristem Progress Index, which consists of extremely liquid corporations that qualify as development shares attributable to their historic income and earnings development charge, non-cyclical nature, and potential for sustainable development over the medium time period.

Buyers on the lookout for development alternatives in 2025 may discover the Meristem Progress ETF to be a compelling selection, given its monitor file and the composition of its underlying index.

The SIAML Pension ETF 40: 88% YtD 

The ETF posted a formidable 88% YtD return in keeping with the NGX official every day listing of December 20, 2024, outperforming the underlying NSE Pension 40 Index’s YtD return of 39.61%.

The SIAML ETF 40 is an open-ended Alternate Traded Fund managed by Stanbic IBTC Asset Administration. This ETF goals to copy, as intently as doable, the overall return of the Nigerian Alternate Restricted (NGX) Pension Index.

The NGX Pension Index tracks the highest 40 corporations on the NGX when it comes to market capitalization, liquidity, and Pension Funds Administration funding eligibility.

The anticipated rebound of key sectors, significantly the banking sector, in 2025 bodes nicely for the SIAML Pension ETF 40

The optimistic financial outlook, pushed by favorable authorities insurance policies and financial reforms, means that the ETF has a vivid future.

The diversification supplied by the ETF, together with the sturdy efficiency of its constituent corporations, makes it a promising funding possibility for 2025

NewGold Alternate Traded Fund + 116% Return 

NewGold Alternate Traded Fund tracks the Rand (SA) value of gold and goals to supply buyers with a cost-efficient technique to spend money on precise gold.

  • The Fund was one of many best-performing funds in 2024.
  • Based on NGX every day official listing of December 24, 2024, the Fund’s YtD return stood at N114%.
  • That is additionally in tandem with the Safety and Alternate Fee’s valuation report of September 30, 2024, with a YtD acquire of 116% outperforming the underlying asset’s YtD return.
  • The efficiency of the NewGold ETF is intently tied to the worth of gold. Gold rose 25.5% in 2024.  If gold costs proceed to rise in 2025, the ETF might see comparable features.
  • Whereas replicating a 116% acquire in 2025 is bold, investing within the NewGold ETF in 2025 might be a promising possibility, given its sturdy efficiency and the optimistic outlook for gold

As of the shut of January 9, 2025, the Fund was already up 12% YtD. The market consensus of key macro variables akin to GDP, yields and inflation, if taken at face worth, suggests optimistic however far more modest development for gold in 2025, mentioned the World Gold Council in a report.

Vetiva Capital Administration Restricted is the sponsoring dealer and liquidity supplier for the NewGold Alternate Traded Fund (ETF) on the Nigerian Inventory Alternate (NGX).

Buyers can spend money on the NewGold ETF by means of Vetiva Capital Administration Restricted.

Others embrace: 

  • Vetiva Bank ETF – +17.21%
  • MERISTEM VALUE EXCHANGE TRADED FUND – +20.68%
  • GREENWICH ALPHA ETF – +28.05%
  • VETIVA S&P NIGERIA SOVERIGN BOND ETF – +28.41%
  • LOTUS HALAL EQUITY ETF- +34.19%
  • STANBIC IBTC ETF 30 – +36.14%
  • VETIVA CONSUMER GOODS ETF – 48.96%
  • VETIV INDUSTRIAL ETF – +69.81%

Takeaways for buyers 

  • ETFs commerce like common shares on the Nigerian Inventory Alternate (NGX). Buyers can promote their ETF models by means of their brokerage account throughout buying and selling hours. The sale value will likely be decided by market forces, which suggests it might be at a premium or low cost to the Internet Asset Worth (NAV).
  • Some ETFs, particularly open-ended ones, enable for the redemption of models instantly with the fund supervisor. This course of entails promoting the models again to the ETF supplier on the NAV. Nevertheless, this selection is often out there solely to massive buyers or establishments because of the minimal redemption dimension necessities.
  • Buyers can nonetheless earn dividends from the part index corporations. When the businesses inside the ETF’s portfolio declare dividends, these dividends are collected by the ETF. The ETF then distributes these dividends to its shareholders, often on a quarterly or annual foundation.

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