December 5, 2023

Total net asset of collective investment schemes and funds in Nigeria has risen to N1.257 trillion in the first five months of the year.

There is no doubt that COVID-19 has affected various parts of the Nigerian economy and indeed, the world economy. One industry in Nigeria that has remained resilient in spite of it all, is the mutual fund industry.

Data released by the Securities and Exchange Commission (SEC) as at May 29, 2019 showed that net asset value of mutual funds rose by N251 billion or 24.95 per cent from N1.006 trillion on December 29, 2019 to N1.257 trillion to close the first five months of the year, on May 29, 2019.

The analysis revealed that in spite of the decline of 5.864 per cent witnessed in the Nigerian equities market during the period under review, the Nigerian mutual fund managers witnessed a growth of 24.95 per cent.

Looking at how the funds flow into the sub-sector showed that Money Market Funds, Bond Market and Fixed Income Funds were the most active.

Money Market Funds up by N93.613 billion, Bond Funds rose by N81.156 billion, Fixed Income Funds appreciated by N76.979 billion, Equities Based Funds up by N331 million, while Ethical Funds increased by N121 million in five months.

On the other side, Real Estate Funds and Mixed Funds depreciated by N1.087 billion, and N121 million, respectively.

Mutual fund is a pool of funds brought together by a professional fund manager from several investors to invest in selected underlying securities. The underlying securities can be one or a combination of the following: stocks, fixed income securities, real estate and commodities. A mutual fund portfolio is structured and maintained to match different investment objectives. The type of mutual fund an individual invests in depends on their financial objectives and appetite for risk.

Meanwhile, in 2019, the Nigerian Stock Exchange (NSE) in conjunction with the Fund Managers Association of Nigeria (FMAN), the Central Securities Clearing Systems (CSCS) and the Association of Stockholding, Nigeria (ASHON) launched the Mutual Fund trading platform, with the aim to improve and enhance access of listed mutual funds to investors and to enhance visibility for the listed funds and promote financial inclusion while stimulating retail investor participation in our market.

The chief operating officer of InvestData Consulting Limited, Ambrose Omordion said that over the years, there has been a significant increase in the number of mutual funds as investors’ interest increases, saying that mutual funds have become a vehicle used by both advisors and institutions to access investible funds and diversify portfolios.

He noted that the money market fund continues to evolve and grow as seen under the period review.

Omordion said that there is a need for the government and financial/investment houses to sensitise the public of the need of alternative investments such as mutual funds and the benefits, as this will create awareness in the market and go a long way in creating strong relationship between the investors and investees.

A stockbroker and the CEO, Sofunix Investment and Communications, Mr Sola Oni stated that mutual fund is a collective investment that enables small savers to benefit from investment in blue chips across a broad spectrum of industries.

He added that although it can be abused if not properly regulated, it is a strategy for diversification by which an investor can hold shares in specialised sectors that ordinarily he cannot afford to buy as individual stocks.

Oni said that mutual trust is a form of risk management and managed by professional money managers and this enhances operational efficiency, which is easy to track.

Group managing director of Cordros Capital said that “We need a collective effort from both the regulators and the operators. The Securities and Exchange Commission has done a lot in this regard as the industry is a lot more regulated and the investing publics are better informed about the opportunities that mutual funds offer.”

Agbeyangi however, noted, “We think both the operators and regulators can still do a lot more with regards to financial literacy and adequate wealth management strategies.

“Operators also need to come out with more investment solutions that cater to the various needs of investors. Government can also look at providing incentives and enabling environment that encourage savings and investments.”

He added that the mutual funds trading platform launched in 2019, marks the beginning of a new era in Nigeria’s mutual fund industry as mutual funds can now be traded on the floor of the stock exchange, saying that investors can now buy and sell units of funds on the floor of the Nigerian Stock Exchange (NSE).

The managing director of HighCap Securities Limited, Mr David Adonri said that mutual fund investment has been widely embraced as a good investment platform in the developed economies, and serves as a vehicle for the mobilisation of capital for economic development.

He noted the investors are now embracing mutual fund instrument to diversify their investment risks especially in the equities market, explain that since investments in mutual funds are like investment in a basket of securities.

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