Nigerian investors appear to be showing an increased preference for managing fund, as the total net asset of collective investment schemes and funds in Nigeria hit a record N1.09Trillion mark.
This record is coming in the midst of the fluctuations in the financial markets.
According to the latest reports on collective investment schemes obtained, it showed a 62 per cent increase in total net asset value and 10.1 per cent increase in total number of registered managed schemes in the country.
Total Net Assets Value (NAV) increased by N419 billion to N1.09 trillion while the number of registered managed funds rose by 10 to 98 schemes.
Stanbic IBTC Money Market Fund remains Nigeria’s largest fund with NAV of N339.21 billion. FBN Money Market Fund followed with NAV of N202.45 billion. Stanbic IBTC Dollar Fund, a fixed-income fund, placed third with NAV of N82.1 billion.
ARM Money Market Fund ranked fourth with NAV of N80.68 billion while AXA Mansard Money Market Funds occupied the fifth position with NAV of N35.77 billion.
Meanwhile, the reports showed significant growths in both ordinary mutual funds and specialist fund but ETFs declined, underlying the dominance of ETFs by equities’ indices.
The growth in the investment funds market was driven mainly by fixed-return segment as investors showed less appetite in an election year characterised by uncertainties.
The reports coordinated by Nigeria’s apex capital market authority, Securities and Exchange Commission (SEC), included 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).
Mutual funds or CIS are joint investment vehicles through which investors can pool funds and invest in a chosen basket of securities with a view to optimise 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.
Net Asset Value (NAV) is determined by subtracting the 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 total number of investment schemes rose from 89 on January 4, 2019, to 98 on January 3, 2020, according to reports provided by SEC.
The growth was mainly in the ordinary mutual funds which rose from 79 to 88 as ETFs and SF remained unchanged at nine and one respectively.
Total net assets value rose from N671.03 billion on January 4, 2019, to N1.09 trillion by January 3, 2020, representing an increase of 62.4 per cent or N419 billion.
Ordinary mutual funds rode on the back of fixed-income and money market funds to N1.042 trillion as against N644.56 billion in the comparable period. SF doubled from N20.63 billion to N42.19 billion. ETFs, however, declined from N5.84 billion to N5.31 billion.
A breakdown of the funds showed a 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 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, also remained the largest group of mutual funds, indicating the prevalent flight to safety by investors as sustained price depreciation weighed on the equities market.
The NAV of money market funds rose from N487.56 billion to N764.71 billion. Fixed income funds-which invest in fixed-income assets, followed as the second largest group rising from N57.65 billion to N144.15 billion.
Bonds funds, named because they invest solely on sovereign and other approved bonds, leapt to the third position from N14.36 billion to N49.36 billion. Real estate funds which invest in real estate assets rose marginally from N43.53 billion to N44.96 billion. The specialist fund, which has only a fund investing in infrastructure, increased from N20.63 billion to N42.19 billion.
Further breakdown showed that mixed funds which allocate funds between equities and fixed-income assets declined marginally from N24.33 billion to N24.30 billion.
The performance of the mixed funds apparently reflected the slowdown in the equities market as NAV for equity funds dropped from N11.89 billion to N10.91 billion.
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 N5.23 billion to N4.55 billion.
Ethical funds typically include relatively large allocations to equities. ETFs, which are dominated by equities indices, declined from N5.84 billion to N5.31 billion.