ARMF Project Phase #1:
Within a 5 years period, the prop trader (fund manager) plans to develop gradually a ‘closed’ =N=10 billion Fixed Income Consolidated Portfolio exclusively for high-net-worth individual and institutional clients and based on an aggressive ‘short’ but defensive investment strategy made up of mainly FGN Savings Bonds, FGN Treasury Bonds, Corporate Bonds, Security Lending & Short Trades, Fixed Income Mutual Funds, Dividend Trades, Commodity ETFs, Index ETFs, etc.
“ARMF” – automated retail margin facility (a bankable retail financial product)
The aim of the ‘closed’ fixed income consolidated portfolio (also known as the ARMF Bond Portfolio) is to provide funds to play a ‘necessary’ market maker & warehousing role with the aim to improve FGN Savings Bonds’ & FGN Treasury Bonds’ liquidity on the NGSE bond secondary market in co-operation with CSCS.
The target ‘buy-side’ investors are mainly high net worth individuals & institutional clients under the following investment limit(s):
min. =N=100 mln per subscription with a min. 12-month revolving holding period at a negotiable fixed interest rate within the following range: CBN TBR (Treasury Bill Rate) plus premium of min. 2.5% p.a – max. 7.5% p.a. Additional installments of min. =N=10 mln investment are allowed in the subsequent months and it’s interest rate is negotiated separately. Interest income is paid at the end of every quarter from date of respective investment placement. Compounding is allowed but at the min. premium.
For instance, according to CBN website, TBR as of Sept-2018 => 11% p.a thus updated negotiable floating interest rate range => min. 13.5% p.a – max. 18.5% p.a.
For example, the prop trader negotiates with an investor the following interest rate: CBN TBR @ 11% + premium @ 5% => 16% p.a. The investor invests via the ARMF bond portfolio the sum of =N=100mln within a 12-month revolving holding period. Thus, a return rate of 4% per quarter to give a gross income flow of =N=4mln quarterly.
Q&A – Clients’ frequently & commonly asked questions include:
1) How Do We Achieve Such A Reasonable & Above Average Annual Return Rate ?
Simply via proprietary trading on NGSE electronic platform(s), predictive bond market data research, having enough cash position as a bond market maker & warehouse manager at every given moment to ensure market liquidity and arbitrage in the NGSE secondary bond markets, upfront interest payment scheme to retail bond investors and most important – our significant in-house ‘sellside’ retail clientele base of >250,000 (with >15,000 being Diaspora Nigerians) thus completing the circular environment.
2) As a retail client, what do I gain by buying FGN Savings Bonds from the secondary market instead of via the primary market auction (PMA)?
The ARMF Bond Portfolio will try adequately at a reasonable short notice (delivery time) to supply to the interested retail investor (buyer) FGN S-bonds with higher coupons than that offered during the respective monthly PMA thereby helping him/her to prevent a ‘reducing’ quarterly interest income flow.
3) Will I pay a premium for such FGN S-bonds as they have already accumulated interest?
– No…..the portfolio’s trading policy is to make these bonds available on the secondary market to interested retail buyers at the same clean price as the PMA standard clean price of N1,000 per bond (excl. transaction charges).
Additional Proposal To Fellow NGSE Stockbrokers & FMDQ Dealers:
If a stockbroker/dealer is already marketing the FGN Treasury/Savings Bonds to it’s retail clients via the DMO primary auction every month and the client wants to sell urgently, we can purchase small and/or large volumes at pre-negotiated discounted prices (via secondary market transactions) from the stockbroker and/or it’s clients.
Please interested investors should contact ‘directly’ Mr. Ekwueme Mike Anyadibe (+234 80 6656 4748 and/or via firstname.lastname@example.org ) for further detailed information on how to take advantage of this new financial product/opportunity.
Ekwueme Mike Anyadibe – Business & Product Development & Head, Fixed Income Sales @ TRW Stockbrokers Limited