Nigeria’s Collective Investment Funds Rise To N1.32trn
Total net asset of collective investment schemes and funds in Nigeria has risen to N1.322 trillion, according to latest records provided by Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC).
Latest reports on collective investment schemes (CIS) obtained at the weekend by The Nation indicated that the net asset value (NAV) of registered professionally-managed CIS rose by N539 billion or 68.8 per cent from N782.64 billion on May 31, 2019 to N1.322 trillion by May 31, 2020.
Collective investment schemes, also known as mutual funds, are joint investment vehicles through which investors pool funds and invest in chosen basket of securities to optimise returns and reduce risks.
Mutual funds are typically managed by SEC-registered fund management firms alongside other professional parties such as trustees and custodians that provide additional supervision on the fund management.
Mutual funds are usually categorised by the class of assets that forms the primary focus of their investments. Thus, there are equity funds, money market funds, bond funds, real estate funds, ethical funds, index funds, mixed funds and infrastructure funds among others.
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 0.68 per cent of the total assets of mutual funds.
Cordros Capital, which manages many mutual funds, said collective investments allow investors to reduce their risks and optimise potential for higher returns by investing in a mix of asset classes in line with their risk horizon and targets.
The CIS report coordinated by SEC included total net asset value of ordinary mutual funds, exchange traded funds (ETFs) and Specialist Fund (SF).
The report showed that total number of registered funds rose by 10.75 per cent or 10 funds from 93 funds in May 2019 to 103 funds by May 2020.
The report showed increase in number of ordinary mutual funds and ETFs but the specialist fund segment remained unchanged. Ordinary mutual funds increased from 83 funds to 92 funds while ETFs slightly increased from nine to 10. There has been only one specialist fund.
The report meanwhile indicated growths in fund sizes across the three segments of CIS with ordinary mutual funds rising from N746.48 billion in May 2019 to N1.26 trillion by May 2020, representing an increase of 68.5 per cent. ETF’s size increased from N5.63 billion to N6.22 billion while specialist nearly doubled from N30.54 billion by May 2019 to N58.78 billion by May 2020.
Further segmental analysis of the funds indicated that the investors showed stronger preference for funds that invest generally in money market instruments and other fixed-income securities.
While investments in equities, real estate, ethical and mixed funds depreciated over the period, money market funds, bonds funds and other fixed-income funds recorded significant growths.
Money market funds, which invest mainly in money market instruments such as treasury bills, remains the largest group of mutual funds, showing growing preference for short-term fixed-income securities amidst year-on-year depreciation in the equities market.
The NAV of money market funds rose from N563.9 billion in May 2019 to N829.80 billion. Fixed income funds-which invest in fixed-income assets, followed as the second largest group rising from N78.27 billion to N215.81 billion.
Bonds funds – named because they invest solely on sovereign and other approved bonds, jumped by 591 per cent from N18.31 billion to N126.57 billion.
However, equities funds dropped from N11.31 billion to N10.97 billion. Real estate funds slipped from N45.55 billion to N45.07 billion while mixed and ethical funds declined from N24.24 billion and N4.89 billion to N23.71 billion and N4.61 billion.
Cordros Capital stated that mutual funds allow people to plan, save and invest towards their dreams and goals including socio-economic and political goals such as wedding, buying a house, starting a business, and furthering education among others.
According to the investment management group, investing for the long term involves setting goals and consistently investing towards achieving them while such long-term investments help people to achieve their lifetime and long term goals.
