417,000 investors push Nigeria’s investment funds to N993bn in 2019

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A clerk at a money exchange bureau counts Naira, Nigerian currency, in Maiduguri, Nigeria, on Wednesday, May 1, 2019. Photographer: Jean Chung/Bloomberg

TOTAL net asset of collective investment schemes and funds in Nigeria has risen by N348 billion to N993 billion, an increase of about 54 per cent in a year.

Official reports coordinated by Nigeria’s apex capital market authority, Securities and Exchange Commission (SEC), indicated increasing recourse to formal fund management by Nigerians but most Nigerians appeared to favour less risky, interest-yielding fixed-income financial assets.

Latest reports obtained yesterday by The Nation showed that total net asset value of ordinary mutual funds, exchange traded funds (ETFs) and Specialist Fund (SF), altogether known as mutual funds or collective investment schemes (CIS) stands at N992.92 billion as against N644.86 billion a year ago. This represents an increase of 54 per cent or N348.06 billion over the 12-month period.

Mutual funds or CIS are joint investment vehicles through which investors can pool funds and invest in chosen basket of securities with a view to optimising returns and reduce risks. A mutual fund is usually categorised by the class of assets that forms the primary focus of its investments. Thus, there are equity funds, money market funds, bond funds, real estate funds, ethical funds, index funds, and mixed funds among others.

There are about 417,000 investors participating in CIS, according to official tally maintained by SEC. This represents about 0.22 per cent of Nigeria’s population.

Chief Executive Officer, Sofunix Investment and Communications, Mr. Sola Oni, said the rising profile of collective investments shows the improving acceptability of these investment vehicles by the Nigerian investors.

He pointed out that collective investment schemes enable small savers to invest indirectly in blue chip companies and other high networth financial assets, thus ensuring diversification of investments and reduction of risk exposure.

“They are cost effective and managed by professionals, and they also promote liquidity,” Oni said.

NAV is determined by subtracting total liabilities of a fund from its total assets. The NAV can further be divided by the total number of units of the fund to determine the unit price. At the last count, total liabilities amounted to some 0.32 per cent of NAV, putting the total assets less than four steps to the trillion naira mark.

The reports indicated that the increase in NAV was driven by increase in number of funds as well as appreciation in some segments. Total number of funds rose 10 per cent from 89 to 98 funds during the period. The reports were dated December 07, 2018 and December 06, 2019.

A breakdown of the funds showed strong and growing preference for funds that invest generally in fixed-income securities, especially short-term securities. The value and percentage of money market funds rose significantly by over the period, accounting for nearly three-quarters of the total funds.

Money market funds, which invest mainly in money market instruments such as treasury bills, remained the largest group of mutual funds, indicating the prevalent flight to safety by investors as sustained price depreciation weighed on equities market.

The NAV of money market funds rose by 52.4 per cent from N460.81 billion to N702.39 billion. Fixed income funds-which invest in fixed-income assets, followed as the second largest group rising from N57.8 billion to N131.33 billion. Real estate funds- which invest in real estate assets retained their third position, rising from N44.32 billion to N46.12 billion. Bonds funds- named because they invest solely on sovereign and other approved bonds, jumped from N14 billion to N37.5 billion. Specialist fund, which has only a fund investing infrastructure, increased from N20.09 billion to N31.03 billion.

Also, mixed funds-which allocate funds between equities and fixed-income assets, were steadied at N24.12 billion, slightly below N24.84 billion recorded in comparable period of 2018. The performance of the mixed funds apparently reflected the slowdown in the equities market as NAV for equity funds dropped from N11.89 billion in 2018 to N10.77 billion in 2019. Ethical funds-which include funds that do not invest in alcohols, cigarette, firearms and sometimes, in the case of Islamic ethical funds, in interest-based businesses, also declined from N5.25 billion to N4.49 billion. Ethical funds typically include relatively large allocations to equities. ETFs, which are dominated by equities indices, also dropped from N5.9 billion to N5.2 billion.

Fund by fund analysis indicated that Stanbic IBTC Money Market Fund remains Nigeria’s largest fund with NAV of N324.2 billion. FBN Money Market Fund followed with NAV of N177.54 billion. Stanbic IBTC Dollar Fund, a fixed-income fund, placed third with NAV of N78.53 billion. ARM Money Market Fund ranked fourth with NAV of N74.84 billion while UPDC Real Estate Investment Fund occupied the fifth position with NAV of N33.99 billion.

Most funds are traded on Nigerian Stock Exchange (NSE), where daily quotes, bid and offer prices, are provided by fund managers. The NSE recently launched a new trading platform for mutual funds which allows seamless trading on mutual funds.

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