By Bayo Amodu
In this interview with Bayo Amodu, head of Strategy & Business Development, AXA Mansard Investments, Jumoke Odunlami, spoke on importance of making right investment decisions especially having a diversified portfolio among others.
What in your opinion must a potential investor look out for in making investment decisions?
I think the purpose or objective of the investment is very key to making investment decisions. An investor must be guided by this to avoid a mismatch. Long term assets should be tailored towards long term investment objectives and vice versa for short term assets. Very often you find that the opposite of this happens and results in sub-optimal returns and people fall short of achieving their goals. The same applies to debt; it is usually a disaster where short term monies have been used to fund long term assets, you would see many a company going down on account of such poor financing decisions. Having said this, whilst matching assets to objective, the client’s willingness and ability to take risk must be taken into consideration.
Portfolio diversification is also a key investment decision. As the saying goes “do not put all your eggs in one basket”. It is important to have a good portfolio mix with quality assets. With equity investments, quality names with strong fundamentals and cash flows should be a preference. With fixed income, investments in attractive and minimal risk instruments such as FGN Treasury Bills and FGN Bonds when held to maturity are a no brainer, while with real estate, the reputation of the developer, pricing etc. all need to be taken into consideration. With private equity investments, it is often advisable to seek the advice and expertise of professionals who are more grounded in assessing those opportunities than investing in a field where one has little information and capacity.
How has the economic recession impacted on the investment pattern of Nigerians?
Obviously the recession has created a drop in purchasing power of many Nigerians. With the hike in food prices and devaluation of the Naira, the cost of living has significantly increased and very many people struggle with meeting their daily needs thereby leading to a huge decline in the investments of Nigerians. However, for a lot of Nigerians who are yet to attain financial freedom I think it is important to treat your investment the way you would treat your taxes and for some people tithes. (These are deductions that occur at a fixed rate irrespective of the economic situation). It is important to ensure that a certain proportion of your income is channelled towards savings and investments irrespective of the economic situation.
Jack Welch (Former CEO of GE) said, “Never miss an opportunity like a good recession”, this is because recessions offer the opportunity for the discerning investors to snap up undervalued assets. Very good assets can be bought at low prices with very huge upsides. Very often people make a killing based on decisions taken during recession.
Going by your experience, which factors would you consider as the barriers to investment in this clime?
I would say inflation. Our environment has been characterised by high inflation and currency depreciation, with returns often eroded by inflation. It is important that investment is done in a manner to beat inflation and asset managers are often available to help structure your portfolio to achieve risk-adjusted returns beyond inflation, where possible. However, it is always better to invest than not to invest at all as the impact of inflation is a lot worse when returns are not being generated.
In a gender sensitive society like ours, how would you assess the investment pattern of women?
I think the investment pattern of women has changed considerably over the years. Unlike some 20 years ago where the men were responsible for meeting all the family financial needs. These days you find women playing more active and significant roles in that regard. In a lot of cases you find women even bearing the entire financial burden of the home. I think these increased responsibilities have reinforced the need to save / invest. This has made women a lot more aggressive with the amounts being invested. However, women also tend to be a lot more conservative. Investments in the traditional low risk money market segment is usually a preference. Also, women tend to be more disciplined with their investments.
Is it enough for a woman to invest in jewellery for instance?
Definitely not and I will share a personal experience of mine in this regard. When I began my career I was advised by a senior colleague of mine to make investments in jewellery. The reason was simple, gold would usually appreciate in value over time. So rather than spending your monies on designer shoes and bags that begin to lose value the moment you step outside the shop you purchased it from, buy gold which often goes in the opposite direction. I did just this and was glad that I had fashion items that I could “rock” and still make a profit on. Unfortunately however, I hired a domestic staff a couple of years back who in just 2 days of working stripped me of almost 20 years of investment in jewellery just like that! So whilst I think investment in jewellery is good, it should form only part of your investment portfolio. A diversified portfolio is always best. Also with investment in jewelry, ensure you are purchasing at the right price. Often times the mark up is as high as 100 – 150%, so if you are purchasing gold for investment purposes ensure it is properly weighed and compared to international gold prices, which is the same benchmark that will be used at the point of exiting the investment.
Is thinking investment a luxurious thought? Do you think it should be the way to go for every individual regardless of Socio/economic status?
It’s a misconception that people equate investment to having huge sums of money. It is imperative that individuals imbibe a savings culture…that is the beginning of investment. And with our financial markets evolving, individuals can start investing with as low as N2,000 in the case of the AXA Mansard Money Market mutual fund, and N10,000 with the AXA Mansard Equity Income Fund. The interesting thing about these funds is that you have people with as low as N2,000 and people with hundreds of millions all benefiting from the same fund.
Like I said earlier, I think investments remains key for everyone until financial independence is attained. Financial independence is the state of having sufficient personal wealth to live according to individually predetermined lifestyle, without having to work actively. I have always been particularly disturbed when I see people who had lived such lavish lifestyles in the past spending their golden years in penury. More often than not this is brought on by lack of adequate planning for the future via investments.
Do you think society still frowns at women taking investment decisions and acting on them?
I believe that our society has evolved beyond that point; the more likely scenario is to find some individuals who still believe that men should make all the investment decisions.
In what ways can women further empower themselves such that they do not have to necessarily depend on their spouses to function?
Women can empower themselves by keeping abreast of the financial matters of the home. Women should actively invest. What happens where a woman loses her spouse for instance? Does her life or that of her kids become over? Knowledge of financial matters which includes insurance & investments is crucial and can help a woman navigate these challenging situations that do rear their ugly heads from time to time.
At what point or stage should one start thinking investment?
I would say it can begin as early as a person is able to understand the value of money and do their additions and subtractions. Of course one must first generate some money before investing. I had a client once who had instilled such a tremendous savings culture in her kids who were only teenagers. They were encouraged to save and not merely save to invest out of their pocket monies and they each gave a periodic account of their savings / returns. I would imagine that these kids would have very little problems when older and would attain financial independence a lot sooner than their peers.
What is the scope of AXA Mansard Investments operations?
We are duly registered by SEC and manage investments on behalf of both institutional and individual clients for whom we invest in both traditional asset classes (Money Market, Fixed income & Equities) as well as alternatives like Private Equity and Real Estate. For Corporates, we provide asset and liability management services, while for individual clients we offer wealth management services for our HNIs and mass affluent segments. We also have a number of registered funds like the AXA Mansard Money Market Fund which invests in money market instruments and currently has an attractive return and the AXA Mansard Equity Income Fund, which invests in a portfolio of selected equities and money market instruments.