Value of Mutual Funds Grows 289% to N219bn in 10 Years

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By Goddy Egene

Collective investment schemes (CIS) also known as mutual  funds,  have  recorded a growth of 289 per cent in  value in the last 10 years, rising from N56.4  billion in 2006  to N219.452 billion as at November 2016.

Mutual funds are a pool of funds collected from two or more clients by a Securities and Exchange Commission (SEC) registered fund manager, which are then  invested  in securities such as stocks, bond, treasury bills, real estate, commercial papers or other similar asset type.

The President of Fund Managers Association of Nigeria (FMAN), Dr. Ore  Sofekun, recently disclosed that the net asset value of mutual funds in the Nigerian capital market has grown significant to N219.452 billion.

Sofekun made this disclosure at the annual workshop of the Capital Market Correspondents Association of Nigeria (CAMCAN), in Lagos, where  she spoke on how to deepen retail investors’ participation in the Nigerian capital market.

The value was N56.4 billion in 2006, rose to N65.9 billion in 2007 and N84.5 billion in 2008 before hitting N98.9 billion in 2009.  The value grew to N108.6 billion in 2010, stood at N80.2 billion in 2011, N91.52 billion in 2012, N150.8 billion in 2013, N175.8 billion in 2014, N263.8 billion in 2015 and N219.452 billion in 2016.

An analysis of the mutual funds by types indicates that money market funds account for the highest. There are money market funds, which invest in short-term debt instruments, mostly Treasury bills. The major objective is to earn reasonable return without fears of the principal loss.  There are also fixed income funds that invest primarily in government and corporate debt instruments. It may appreciate in value, but the primary objective is provision of steady cash flow.

The remaining onesare: equity funds,  which are exposed to the stock market with the objective of long term growth and income  and balanced funds  which  contain a mix of fixed income and equities for risk diversification.  The objective is to achieve income and capital appreciation.

In addition, there are bond fund, real estate fund, ethical funds and exchange traded funds.

However, the money market funds, which are nine in number,  account for N105.7 billion, which is 48.17 per cent of the total value of mutual funds in the market.

Real estate funds, three in number, follow with N45.493 billion, while mixed funds, 15 in all, account for N23.291 billion.  The 10 fixed income funds in the market account for N16.533 billion, just as 12 equity based funds recorded N12.727 billion.  Six bond funds account for N7.456 billion, while five ethical funds recorded N4.682 billion. Exchange traded funds, seven in number account for N3.566 billion.

According to Sofekun, this level of investments can be increased if more retail investors patronise the market. She said retail Investors participation can be achieved “through forced or incentivised voluntary savings, investor protection and confidence building, accessible distribution channels and financial inclusion/literacy.