Meristem lists two style-based ETFs on NGX — one targeting undervalued stocks, one targeting high-growth companies. This guide explains what each strategy means and how to think about the choice.
The Nigerian Exchange lists two ETFs from the same fund manager, Meristem Asset Management, that represent opposite ends of a fundamental investing debate: should you buy undervalued companies trading cheaply, or high-growth companies expanding fast? The Meristem Value ETF (MERVALUE) makes the case for value. The Meristem Growth ETF (MERGROWTH) makes the case for growth. Understanding the difference between these two strategies is a useful step for any Nigerian investor researching the ETF market.
Value investing is the practice of buying shares that appear underpriced relative to what the underlying business is actually worth. Popularised by Benjamin Graham and Warren Buffett, the idea is that markets sometimes misprice companies — especially mature, unglamorous ones — and patient investors can benefit by buying them while they are out of favour. Value investors typically screen for low price-to-earnings (P/E) ratios, low price-to-book (P/B) ratios, and high dividend yields.
Growth investing is the practice of buying shares in companies that are expanding their revenues, profits, or market share rapidly — even if their current share price already reflects optimistic expectations. Growth investors are willing to pay a premium today for the earnings power they believe will materialise tomorrow. These companies often reinvest profits rather than paying dividends.
Value investing asks: "Is this company cheap relative to what it is worth today?" Growth investing asks: "Is this company likely to be worth significantly more in the future?" Neither question is wrong — they reflect different ways of generating returns.
Both ETFs are listed on the Nigerian Exchange and managed by Meristem Asset Management Limited, which was incorporated in 2008 and is regulated by the Securities and Exchange Commission (SEC) of Nigeria. Meristem was the first indigenous Nigerian asset manager to claim compliance with the Global Investment Performance Standards (GIPS), a framework that signals a strong commitment to performance reporting transparency.
MERVALUE tracks the NGX Meristem Value Index, a rules-based benchmark that screens Nigerian-listed companies using value metrics: low price-to-earnings ratios, low price-to-book ratios, and high dividend yields. It was listed on the NGX in 2020 and is structured as an open-ended, passively managed ETF. The result is a basket of NGX equities that, at the time of each rebalance, qualify as undervalued by these measures — typically more mature companies in banking, consumer goods, or industrial sectors.
MERGROWTH tracks the NGX Meristem Growth Index and screens for companies with strong earnings growth potential — companies expanding revenues rapidly and typically reinvesting profits rather than distributing them. The basket leans toward higher-valuation, higher-momentum names that are expected to grow into or beyond their current prices.
The table below summarises the key differences across five dimensions:
Value strategies have historically performed well in economic recovery periods, rising interest rate environments, and market corrections. When broad markets fall, cheaper value stocks often hold up better because there is less speculative premium to deflate. In Nigeria's equity market, banking and industrial stocks — which frequently pass value screens — have driven meaningful recovery rallies following periods of economic stress.
The critical caveat is that value can underperform for extended cycles. Between roughly 2010 and 2020, global growth strategies significantly outpaced value — not because value was wrong in theory, but because the macro environment (low interest rates, technology dominance) persistently rewarded high-growth, high-valuation companies. Nigerian investors should not assume that past cycles in other markets will repeat on the NGX in the same way or on the same timeline.
Growth strategies shine in bull market conditions, low interest rate environments, and periods when investors are willing to pay a premium for future earnings. Companies that are genuinely growing revenues and market share can compound wealth faster than stable, mature businesses over a full market cycle — but only if you hold through the inevitable corrections and periods of underperformance.
The risk with growth is valuation: if expectations are already very high and growth disappoints, even modestly, the de-rating can be sharp. Growth ETFs can also be more volatile, meaning their unit prices move more dramatically in both directions.
Some investors hold both MERVALUE and MERGROWTH simultaneously. This blends the two styles and reduces the risk of being wrong about which strategy will outperform in the near term. It is not necessarily the best approach for everyone, but it is a common portfolio construction choice.
Yes. Holding both is a common way to blend the two investment styles and reduce concentration risk in either approach. Whether it makes sense for you depends on your overall portfolio goals and size.
Not necessarily. MERVALUE typically has lower volatility because value stocks tend to be more mature and stable, but both ETFs carry equity market risk. Undervalued stocks can remain cheap for years, and any NGX-listed equity product is exposed to Nigerian economic and currency conditions.
A minimum time horizon of 3 to 5 years is commonly recommended for value strategies. This is because the mean reversion process — where the market eventually recognises and re-prices undervalued companies — can take years to play out. Short holding periods increase the risk of selling before the value thesis has had a chance to work.
No. This article is for general educational information only. It is not a recommendation to buy, sell, or hold any ETF. If you need personalised guidance, speak to a licensed financial adviser.
Research the full Meristem Value ETF profile — covering the NGX Meristem Value Index, the selection criteria, investor profiles, and portfolio roles — before making any decision.
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