Mutual funds net asset value (NAV) in the nation’s capital market recorded improved performance at the end of first half of the year, and stood at N607.7 billion.
This figure is higher than N418.831 billion it closed on December 29, 2017. Nigeria’s 74 registered mutual funds have total net asset value of N551.7 billion by the close of business on April 20, 2018, there are 75 mutual funds currently under the regulation of the Securities and Exchange Commission.
A mutual fund is an investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets.
The Managing Director of InvestData Consulting Limited, Ambrose Omordion, explained that mutual funds provide an opportunity for people who do not have the time to invest in the money and capital market or those that do not know much about the business of buying and selling securities to invest and make money.
A breakdown of fund activities obtained from the Commission, showed that in the first six months of the year, the fixed income fund led the mutual funds’ performance with a gain of 77.57 per cent, ethical funds gained 45.10, while money market funds appreciated by 13.14 per cent.
The equity based funds during the period rose by 5.99 per cent, mixed funds up by 4.73 per cent, while real estate funds appreciated by 1.18 per cent, in the first half of the year.
Less than four per cent of the Nigerian population are investors in the nation’s capital market, and only about six per cent of the domestic investors participate in mutual funds, otherwise known as collective investment schemes (CIS).
For the first half year, the Nigerian Stock Exchange-All Share Index (NSE-ASI) recorded a positive gain of 0.09 per cent, which explains the performance of the equity-based funds.
Nigeria’s equity market witnessed some calmness and subdued volatility in the first 180 days. Inflation in Nigeria moderated while the dollar exchange rate stabilized around the N360 range within the period even as yields continued to fall along all maturities. All these had effect on the equity market, which had a multiplier effect on the equity mutual funds.
Financial analysts noted that fixed income funds which is typically, investment in government securities, Treasury bills, corporate bonds, among others recorded a massive increase, reflecting the huge appetite demonstrated towards such instruments by the investing public.
But analysts argued that the implementation of new Multi-Fund Structure for Pension Fund Administrators (PFAs) by PENCOM is a good development as it will free pension fund managers to invest in variable income securities like equities, ETFs and mutual funds, which will in turn increase market activities, and add to the vibrancy of the market.
For fixed income funds, they said the Central Bank of Nigeria (CBN) would likely become more aggressive with OMO sales to keep naira assets more attractive and maintain FX stability.
“The encouraged investors to consider the CIS a best option for their alternative investments; affirming that awareness needs to be intensified in the industry to enable Nigeria’s see the advantages and benefits in the CIS.”
He explained that by investing in mutual funds you have an opportunity of investing in a portfolio of heterogeneous instruments rather than having your money in one asset class.
A senior broker with Calyxt Securities Limited, Tunde Oyediran said that the Nigerian mutual funds market remains underdeveloped, saying that a well-developed mutual fund market has the potential to offer enormous benefits to the Nigerian economy and the public.
According to him, the unit trust scheme can help deepen the Nigerian capital market, extend capital market activities to the grassroots, facilitate pooling of funds for investment purposes, encourage small private enterprises approach capital markets for long-term funds, generate profit/income capital appreciation for investors, and provide retail investors with access to professional management of the funds.
The managing director of HighCap Securities Limited, David Adonri said that mutual funds are a veritable investment vehicle that accommodates a wide variety of investors no matter one’s investment style and financial goals, saying that “they can offer the advantages or diversification and professional management.”