Leveraging on its five-year track record since its 2019 establishment in Lagos, Emerging Africa Asset Management is now testing waters among local investors with its first Shariah compliant mutual fund.
Managing Director and CEO Ada Ijara explained to IFN Investor: “Our conventional funds have been performing well, so the launch of the Shariah fund is in line with our efforts to venture into a potentially lucrative Muslim market in Nigeria.
“Launching the fund is a learning curve so we will see how to tweak the fund to suit the right investors. We aim to initially access our domestic market and expand to regional markets.”
Subscription to units in the Emerging Africa Halal Fund, launched on the 4th July 2024, is now only via the group’s ‘Emerging Wealth’ app – unlike the previous four conventional funds listed on the Nigerian Stock Exchange (NGX).
This app has garnered over 1,000 downloads since the Android version was first launched on 1st July 2022, with the iOS version some months later. It is meant as a complementary channel to the group’s Fundall digital bank app, which has over 50,000 downloads.
Ada expressed confidence in the new Halal fund drawing investors, as its Islamic concept is in line with the firm’s ESG (environmental, social and governance) focus to offer economically sustainable products with its other funds.
The Emerging Africa Balanced Diversity Fund, with a bias for corporate gender diversity, was valued at NGN330.89 million (US$208,461) as at the 19th July 2024, with NGX statistics showing this fund’s year-to-date return at 32.4%.
Others valued as of the same date are the Emerging Africa Money Market Fund at NGN3.38 billion (US$2.13 million), the Emerging Africa Bond Fund at NGN1.01 billion (US$635,141) and the Emerging Africa Eurobond Fund at NGN4.78 billion (US$3.01 million).
While the intent is to eventually have the Halal fund NGX-listed, Ada said the current focus is to reach out directly to investors – including via selected fintech partners plus alternate investor-related distribution and sales channels.
“We intend to not only reach the urban investors but also rural investors in Nigeria”, with roadshows from August throughout the country. “Investors can invest as little as NGN10,000 (US$6.30) which is affordable to most Nigerians.”
The Emerging Africa Halal Fund, with an initial size of NGN1 billion (US$630,000), is an open-ended mutual fund aiming for income generation and capital preservation through Shariah compliant avenues.
This fund invests in Nigeria’s sovereign Sukuk, sub-sovereign Sukuk, corporate Sukuk and asset-backed investments such as Ijarah and Murabahah, among others, with uninvested funds held in non-interest-bearing accounts or near-cash Shariah compliant securities.
Ahead of this fund’s launch, Ada said: “We noticed that the demand for ethical or Shariah compliant products has been rising. Therefore, we engaged a Dubai-based Shariah advisor prior to setting up our maiden Shariah fund.”
One of the largest economies in Africa with a large Muslim population, Nigeria is still a relatively new entrant to Shariah compliant mutual funds. According to the Fitch Rating agency the Islamic finance industry is estimated to be worth US$3.8 billion, of which Sukuk takes up a lion’s share of 39.8%, and Islamic funds, less than 1%. Nonetheless, Islamic funds show a lot of promise with average yield of 7.97% as of the end of May 2024.
