We recently had a conversation with Adesola, a potential investor with a medium-term goal of paying his rent with N550,000 on 01 January 2023. His primary consideration was for his investment to be safe but still provide competitive returns. During his call with an FBNQuest Investment Advisor, he was informed about the FBN Bond Fund.
Adesola: What is the FBN Bond Fund?
Investment Advisor: The FBN Bond Fund is registered and regulated by the Securities and Exchange Commission (SEC) and governed by a Trust Deed. It invests in relatively safe debt (Government Debt and highly credible Corporate Bonds) and Market Instruments and provides potentially higher returns. The yield to date is 10.72% as of 25 July 2022).
So, Adesola knows about the FBN Bond Fund, but he asks further questions
Adesola: Will I lose my principal or is my principal safe?
Investment Advisor: Your principal is not affected by market volatility. This is because of asset allocation: – 65 -70% of the assets are invested in risk-free assets, (government securities). In contrast, 30 -35% of the asset allocation invests in credible high-quality corporate bonds and money market instruments like Money Market Funds.
Adesola: How regular will my returns be distributed?
Investment Advisor: Returns are distributed annually but you can always get your money whenever you want by selling your units in exchange for cash.
Adesola: Why will my investments be denominated in units and how are the units arrived at or calculated?
Investment Advisor: All investments in our mutual funds are unitized. For example – if on the 1st of July 2022, the price of one unit of the FBN Bond Fund was N1,000 and you pay N10,000, you will get 10 units.
Following the conversation, Adesola decided to invest in the FBN Bond Fund and paid N500,000 into the FBN Bond Fund account on 01 July 2022. Adesola got 500 units created in his name and was sent his statement.
Adesola: How do I calculate my returns since returns are not distributed daily?
Investment Advisor: If on 31 December 2022, the price of one unit of FBN Bond Fund is now N1,150.00 per unit and you – Adesola still owns 500 units since he did not invest additional funds or redeem. Adesola asks; what is the value of my investment and what is the return on my investment? The value of Adesola’s investment is N1,150 X 500 units = N575,000.00; a return of 15.00%.
Adesola: What does year-to-date return mean and how does this affect my investment daily?
Investment Advisor: For 2022, the year-to-date return is the return earned by investors who invested from Jan 1st, 2022 to the current date. In Adesola’s case, his year-to-date return is the return earned from the day he invested; July 1st, 2022, to the current date. The return earned daily is reflected in the unit price of the Fund which increases daily to reflect the income earned. This explains why the price of one unit increased from N1,000 in July to N1,150 in December based on Adesola’s scenario above.
To invest in the FBN Bond Fund, fill out the form below, contact us at invest@fbnquest.com, or call +234 (0) 708 062 6000-4.
To schedule a consultation with our Financial Advisors, click here.