Investors Quarterly – April 2021

The Rainy Day Finally Came…

It’s interesting to acknowledge that a year has already passed since our lives changed dramatically due to the COVID-19 pandemic. From lock downs, to embracing the virtual life, working remotely, home schooling, limited social engagements, facemasks becoming permanent fixtures on our shopping lists, and WIFI attaining chieftaincy status.

On the bright side, we have become more health conscious, increased introspection, developed closer relationships with our families, and of course skimped on our clothing budget (nowhere to go anyway).

Unfortunately, there were also negative economic consequences for many businesses who could not function adequately, and thus affected everyone connected to them. The country also went through a brief recession and is still struggling to recover. Our experience over the last year has shown that if we had practiced all the financial intelligence tactics we had learned, we may have had an easier time dealing with constrained or shaky earning abilities.

We now realize that phrases like “create a budget”, “be disciplined”, “save and invest 30% of your income” are not buzz words. They are smart actions which would break our fall whenever the tough times hit.

It’s important to ask ourselves, “how long can I survive if my income stops for any reason?” If your answer is less than 6 months, please be assured that your financial advisers are here to assist with your financial health plan.

Meanwhile, how many of us were amused the first time our parents told us they had a zoom meeting to attend 

How Did My Investments Perform This Quarter?

The Lotus Halal Investment Fund (Halal)

If you are ready to take some risk, don’t mind some exposure to equities, welcome capital appreciation and annual income distribution, this is the right fund for you.

Q1 2021 Full Year 2020 Full Year 2019 Since Inception
-1.38% 27.48% 5.99% 68.40%

The Lotus Halal Fixed Income Fund (FIF)

If you prefer to take minimal risks, capital preservation, quarterly income distribution and no exposure to the stock market, this is the right fund for you.

Q1 2021 Full Year 2020 Full Year 2019 Since Inception
1.90% 11.04% 13.13% 63.81%

Following a negative outturn at the equities market, the Halal Investment Fund dipped by -1.38% in the quarter. Despite the adverse run, the fund’s performance compares favorably against its peers.

In addition, the fund paid a dividend of ₦0.07/unit during the quarter out of its 2020 profits.

In the first quarter of the year, the Lotus Halal Fixed Income Fund gained 1.90%. The gains came from returns on fixed income contracts and rental income on Sukuk.

Based on this positive performance, the Fund paid a dividend of ₦20.00/unit out of profits made in the quarter. This payout translates to a dividend yield of 1.72% for the period.

Equities Investing for the Halal Investor

A typical equity investment in which an investor buys the ordinary shares of a company and earns a return that comprises of a price gain (or loss) and dividend is fair participation principle that is compatible with Halal investing
Stock screening enables the Halal investor select companies that are Shariah-compliantHOW IS A STOCK SCREEN PERFORMED?
A two step process that involves: Assessing a company’s core business and evaluating a company’s financial information.HOW DO I ASSESS A COMPANY’S CORE BUSINESS?
Ensure that the target company is not principally involved in prohibited practices such as gambling, production or trading of alcohol, tobacco, adult entertainment or interest – based financial services.

To provide assurance that the company is not entangled in interest-based dealings, the investor reviews the financial statements. AAOIFI, a body of scholars, has provided financial ratios that can guide the  analyst to determine what is excessive. It sets thresholds for a firm’s interest income, cash, interest-bearing debt and receivables.

In Nigeria, the NSE Lotus Islamic Index is composed of stocks that have been screened for Shariah compliance. You can also invest in a fund that tracks this index such as the Lotus Halal Equity Exchange Traded Fund.  The Halal Investment Fund also invests in screened stocks.