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HFC’s Investment Banking Jewel

HFC group is celebrating its 20th anniversary. Kofi Ahovi takes a look at the performance of its investment services subsidiary.


HFC Group, one of the most versatile financial institutions in the country, has chalked 20 years. Starting as Home Finance Company providing mortgage finance for home acquisition, it has now grown into a fully fledged financial service group providing all manner of financial solutions to its clients.

However, mortgage finance remains one of the bank’s core business activities in addition to commercial and investment banking services.
HFC Bank Ghana limited, as a Universal Banking institution, was licensed in November 2003 to provide banking services to the banking public.

The group comprises itself and four subsidiaries which are HFC Investment Services Limited (HFC-ISL), HFC Realty, HFC Brokerage Service and Boafo Microfinance. These are wholly owned by HFC Bank except Boafo Microfinance in which it has 51% shareholding.
The jewel in the crown with regards to these subsidiaries is HFC-ISL which manages four collective investment schemes all of which outperformed their peers last year.

The unit trusts recorded impressive gains during a period where most collective investment were experiencing falls due to declining equity prices.

This wholly owned subsidiary of HFC Bank has proved to be one of Ghana’s most professional investment banking institutions with an outstanding track record in asset management, where aside from managing collective investment schemes, it also provides prudent fund management, individual client investment service, fund management for groups and institutions, as well as endowment fund management.

HFC-ISL alongside Databank leads in the number of unit trusts it manages at four apiece. However, with regards to the diversity of business markets it invests them in, HFC-ISL is peerless. It invests in the capital market through the HFC Equity Trust, in the money market through the HFC Unit Trust, and uniquely, in the real estate market through the HFC Real Estate Investment Fund (REIT). Its latest addition is the HFC Future Plan Trust (HFC F-PLAN), which invests in the capital market both locally and on the continent.

Its expertise in fund management is clearly illustrated by the fact that all four funds are leaders in their respective areas of investment.

The HFC Equity Trust invests primarily in equities, and to a much less extent preference shares which between them account for about two-thirds of the Trust’s total investment portfolio. The rest is invested in other funds, short term securities, bonds, and bank deposits, for purposes of portfolio diversification and liquidity, in order to ensure that members can cash part or all of their holdings within 48 hours of serving notice, as guaranteed by the fund managers.

Last year, just as in previous years, the HFC Equity Trust outperformed the benchmark Ghana Stock Exchange all share index, providing a negative yield of 19.94% for the year, compared against the negative all-share index of 46.58% clinched for the year.

This is the result of truly astute professional fund management, with consistency of outperforming the Ghanaian stock market that is unmatched by other equity funds.

The key has been in the selection of equities that tend to grow the fastest. Indeed, the Trust’s equities portfolio reads like a wish-list for equity investors on the GSE.

This year, the Trust is once again living up to its billing, delivering year to date gain of 19.70% by the end of May, with a unit price of GH¢0.1677. The value of the fund has grown to GH¢1.6 million.

The HFC Unit Trust has proved to be an excellent way to derive the best returns on investment possible from the money market. To do this HFC-ISL adopts an aggressive, but prudent approach aimed at overall improvement in annualized yield, size of the fund and portfolio strategy.

The fund, which is valued at GH¢25 million, has so far posted an annualized yield of 22.67% for the year, compared with 22.60% recorded in 2009.

This impressive performance was made possible by the fund managers continuous investment shift towards higher yielding fixed income investments.

The outlook for the rest of 2010 holds even more promise than the first two quarters of the year.

The HFC Real Estate Investment Trust is a unit trust scheme that is in a class of its own being the only licensed collective investment scheme that invests in real estate in Ghana. More importantly for investors though is the fact that it is one of the best performing funds available in Ghana, more often than not providing better yields than even the best performing equity funds.

In 2009 the HFC-REIT delivered a yield of 35.59% propelled by property development and property sales in Accra, Tema and Kumasi. Currently, it has recorded an annualized yield of 15.77%. The fund’s value had also grown to GH¢7.6 million as at the end of 2009.

The HFC Future Plan Trust (HFC F-PLAN), the newest unit trust from HFC-ISL, is a long-term collective investment scheme that has dual objectives. The primary objective of F-plan, which is a balanced fund, partially equities and fixed income, is to cultivate in the youth the habit of investing, while serving as an alternate investment vehicle for parents and guardians themselves. Secondly, the F-plan also caters to the future educational needs of the youth.

The F-Plan invests mobilized funds into fixed income securities, shares of listed companies on the Ghana Stock Exchange and other organized African markets.
The fund has so far posted a yield of 20.79% as the end of May this year, compared to 10.42% recorded for 2009. It has a value of GH¢600,000.

To inculcate the habit of investing in the youth, HFC-ISL visits senior high schools to educate them on investment. Some of the schools visited include Accra Girls Senior high School, Accra High Senior High School, St. Johns High School, Ridge church among others. An investor needs as little as GH¢5 on the average to invest in any of the unit trusts.

Even as the entire HFC Group celebrates its 20th anniversary some of the loudest cheers will deservedly come from the offices of HFC-ISL.

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