Get to know your mutual funds: HFC Equity Trust

HFC equity trust

HFC equity trust was established in July 2004 by HFC Bank (Ghana) Limited. The fund is managed by HFC Investment Services Limited, a subsidiary of HFC bank. Just like most other funds, HFC equity trust is an open-ended investment scheme with a long-term investment goal. Started with an initial capital of about GH¢700,000 in 2004, the fund’s value currently stands at GH¢5.32milion as of the end of 2016.

Nature and investment strategy of HFC equity trust

Due to its long-term investment objective, HFC equity trust invest most of its portfolio in stocks on the Ghanaian market. Part of its portfolio is however invested in fixed income instruments to enhance liquidity of the fund. According to the portfolio composition displayed on its website, the fund mainly invest in 70-80% equities, 5-10% money market, 10-15% other schemes and 5% as cash in the bank. This composition however varies depending on the prevailing conditions of the economy, in particular, whenever there is a dramatic change in the performance of the exchange. In fact, there have been occasions when investment in equities was remarkably reduced to favour that of the fixed income instruments. Typical examples were the 2015 and 2016 financial years. At the end of 2015, equity portion of the fund constituted 31.30% (a reduction from 63.38% in 2014) while fixed income instruments formed a whopping 62.66%. Of the 62.66% fixed income allocation, corporate bonds constituted 17.05% while investment in other short-term instruments made up 45.61%. Likewise, in 2016, the fund’s assets portfolio was skewed in favour of the money and fixed income market. The fund’s portfolio allocation, during this period, was 23.18% equities, 54.42% money market instruments and 14.42% corporate bonds (Refer to the pie chart below).

HFC Equity Trust portfolio mix 2016
Portfolio allocation of HFC equity trust as of 31st December 2016. Source: HFC equity trust 2016 annual report

According to the fund’s 2016 annual report, HFC equity trust invested in 16 out of the about 40 companies listed on the GSE. This was a reduction from the 21 listed stocks it had previously invested in 2015. Some of the fund’s top equity holdings in the same period (2016) were GCB Bank Limited (GCB), Ghana Oil Company Limited (GOIL), Total Petroleum Ghana Limited (TOTAL), Enterprise Group Limited (EGH) and Fan Milk Limited (FML). This was not much different from its top equity holdings in the preceding year. At the end of 2015, the fund’s top five equities were GCB (constituting 5.59% of the fund’s value), GOIL (4.14%), TOTAL (3.85%), EGH (3.79%) and ETI (2.94%).

Performance of HFC equity trust

The price of HFC equity trust is updated by the fund manager on a regular basis, usually after each business day. The price of the fund reflects its net asset value which in turn depends on the performance of its portfolio on the market (For current prices of HFC equity trust and other mutual funds, click on this link). At the end of each financial year, the annual return of the fund is similarly published. In the past decade (since 2005), HFC equity trust’s best performance has been 70.43%, recorded in 2013. On the other hand, its worst performance in the same period is -21.25%, which was recorded in 2005. As noted earlier, HFC equity trust alters its investment mix (in favour of fixed income instruments) whenever the equity market performs poorly. This, in some way, cushions the fund from the effects of huge market losses. For example, when HFC equity trust reduced its equity portfolio to 31.3% in 2015, it recorded an annual return of 14.49% even though the GSE lost by -11.77%. Similarly in 2016, HFC equity trust recorded 7.35% as against GSE return of -15.33%. The fund, by then, had as low as 23.18% of its portfolio in stocks. The table below shows the annual performance trend of HFC equity trust since 2005, compared with GSE returns over the same period. For performance comparison of HFC equity trust and other investment funds, refer to this link.

Performance trend of HFC equity trust
Year HFC equity trust return, % GSE return, %
2005 -21.25 -29.72
2006 12.46 5.21
2007 34.19 31.21
2008 38.89 58.16
2009 -19.94 -46.58
2010 25.12 32.25
2011 2.85 -3.1
2012 0.11 23.81
2013 70.43 78.81
2014 8.23 5.4
2015 14.49 -11.77
2016 7.35 -15.33

(Credit: Compilation of HFC equity annual returns was partly contributed by ARG)

HFC equity trust’s awards

HFC equity trust is recognised for the following awards:

·         Equity fund of the year, 2013 (Ghana Investment Awards)

·         Portfolio manager of the year, 2013- Genevieve Abban, HFC equity trust’s portfolio manager (Ghana Investment Awards)

Investing in HFC equity trust

HFC equity trust is opened to both individuals and groups. Prospective clients can contact the fund manager, HFC Investment Services Limited, through the various HFC bank branches across the country. Opening an HFC equity trust account attracts no charges. However, withdrawals made before one year attract a fee of 2.5%. For details on investment fees and commissions, refer to this link.