ETFs outperform underlying indexes in 2024: A good hedge in 2025? 

With some ETFs achieving returns as high as 116% and an average Year-to-Date (YtD) gain of 45% as of December 20, 2024, these investment vehicles proved to be a standout choice.

This performance not only eclipsed the average YtD gain of 33% recorded by their underlying indexes but also demonstrated the advantages of ETFs: diversification, reduced exposure to individual company risk, and the potential for substantial growth.

For investors looking to hedge against market volatility and capitalize on sector-wide trends, ETFs have emerged as a compelling option.

As 2025 unfolds, the question remains: Can ETFs maintain their momentum, and will they continue to serve as a reliable hedge in an uncertain economic landscape?

This article explores the highlights of ETF performances in 2024, their unique benefits, and the potential investment opportunities they present in the year ahead.

These funds include the following: Greenwich Alpha ETF, Lotus Halal Equity ETF, Meristem Growth Exchange Traded Fund, Meristem Value Exchange Traded Fund, NewGold Exchange Traded Fund, Stanbic IBTC ETF, SIAML Pension ETF 40, Vetiva Banking ETF, Vetiva Consumer ETF, Vetiva Griffin 30 ETF, Vetiva Industrial ETF, and Vetiva S&P Nigeria Sovereign Bond ETF.

Investors who placed as little as N100,000 in these ETFs reaped rewards through diversification, lower risk, and significant growth.

ETFs are investment vehicles that track an index, a basket of assets, or a commodity but trade like regular shares on the NGX, making them accessible to a wide range of investors.

By reducing exposure to individual company risk, ETFs provide a balanced investment option for both new and seasoned investors.

It is important to understand that ETF prices are determined by market forces, so a buyer might buy at a slight premium or discount versus the Net Asset Value (NAV).

Some ETFs may not track widely accepted indices, which can result in higher costs and higher risks. The key is selecting and investing in the right underlying indexes that ETFs mirror.

Vetiva Industrial ETF: +70% Return 

The Vetiva Industrial ETF, which mirrors the performance of the NGX Industrial Index, posted an impressive return of 69.81%, far outpacing the index’s 32% YtD gain and remaining well above the November inflation rate.

This ETF offers exposure to industrial heavyweights such as BUA Cement, Dangote Cement, and Lafarge Africa, allowing investors to diversify within Nigeria’s industrial sector without needing to invest directly in individual stocks.

The Meristem Growth Exchange Traded Fund (ETF) had a stellar performance in 2024. According to the SEC’s September 2024 valuation report, the ETF recorded a gain of 75%, significantly outperforming the underlying Index’s YtD gain of 43%.

The Meristem Growth Exchange Traded Fund (ETF) had a stellar performance in 2024. According to the SEC’s September 2024 valuation report, the ETF recorded a gain of 75%, significantly outperforming the underlying Index’s YtD gain of 43%.

This impressive performance highlights the potential of the Meristem Growth ETF as a strong investment option.

The fund tracks the NGX Meristem Growth Index, which is composed of highly liquid companies that qualify as growth stocks due to their historical revenue and earnings growth rate, non-cyclical nature, and potential for sustainable growth over the medium term.

Investors looking for growth opportunities in 2025 might find the Meristem Growth ETF to be a compelling choice, given its track record and the composition of its underlying index.

The ETF posted an impressive 88% YtD return according to the NGX official daily list of December 20, 2024, outperforming the underlying NSE Pension 40 Index’s YtD return of 39.61%.

The SIAML ETF 40 is an open-ended Exchange Traded Fund managed by Stanbic IBTC Asset Management. This ETF aims to replicate, as closely as possible, the total return of the Nigerian Exchange Limited (NGX) Pension Index.

The NGX Pension Index tracks the top 40 companies on the NGX in terms of market capitalization, liquidity, and Pension Funds Administration investment eligibility.

The expected rebound of key sectors, particularly the banking sector, in 2025 bodes well for the SIAML Pension ETF 40

The positive economic outlook, driven by favorable government policies and economic reforms, suggests that the ETF has a bright future.

The diversification provided by the ETF, along with the strong performance of its constituent companies, makes it a promising investment option for 2025

NewGold Exchange Traded Fund tracks the Rand (SA) price of gold and aims to provide investors with a cost-efficient method to invest in actual gold.

As of the close of January 9, 2025, the Fund was already up 12% YtD. The market consensus of key macro variables such as GDP, yields and inflation, if taken at face value, suggests positive but much more modest growth for gold in 2025, said the World Gold Council in a report.

Vetiva Capital Management Limited is the sponsoring broker and liquidity provider for the NewGold Exchange Traded Fund (ETF) on the Nigerian Stock Exchange (NGX).

Investors can invest in the NewGold ETF through Vetiva Capital Management Limited.