Sometime in 2008, Total E & P, now Total Energies, one of the leading oil companies in Nigeria, engaged me and my team at Moneywise, a personal finance company, to organise an investment education series for their staff in Lagos and Port Harcourt. After a successful session in their Lagos office, we were flown in one of their small private planes to one of their platforms in Port Harcourt for the second leg of the training.
Riding on that plane to Port Harcourt was a very tough experience. The plane flew at a very low altitude and could not absorb the torrents of turbulence we encountered on the way. We were about 10 on the plane, and we all became nervous as the plane tore through the heavy winds. I did not partake in the small chops they were serving. Interestingly, while most of us were experiencing some inner turmoil, the lead pilot and his assistant were relaxed and chatting away. When we eventually landed in Port Harcourt (a big relief, indeed), I decided to corner the pilot and ask him what gave him confidence while the rest of us were panicking. His answer was simple but profound: knowledge. He said the more knowledge you have, the less you operate in fear. Put differently, ignorance is the major propeller of fear.
I have discovered that this statement holds true in every area of endeavour and more interestingly, in the area of investment. As a financial journalist since 1990, I have observed this truth in the area of investment. For instance, I have been close to a billionaire investor since that period who has raked in an incredible amount of money investing in stocks, real estate, gold etc. I noticed that his investment strategies were most times contrarian: when the majority of ordinary investors were selling in panic, he would calmly instruct his stock brokers to buy large quantities of the same stocks many were disposing of. His confidence, I later understood as I got closer to him, was based on his depth of knowledge in the area of investment. He had gone ahead to acquire certifications in stock broking, finance, and investment law, even though he was trained as an engineer.
Since the 2008 episode of stock market crash, a lot of ordinary investors have never looked in the direction of stock investment, unwilling to let go of their unpleasant experiences. Yet informed investors, including my billionaire investor, have continued to rake in cash investing in the capital market arena, not necessarily in stocks, but largely in their derivatives. How many people are aware, for instance, that with as little as N5,000, you can start to rub shoulders with big-time investors while the associated risks are largely attenuated?
In its mission to educate the investing public, THISDAY Economic Insights Unit, a newly created division of THISDAY devoted largely to market intelligence, has decided to start a series of special reports focusing on investment education. We are starting with the series on mutual funds slated for publication tomorrow Monday. In the process of putting the reports together, we decided to despatch our analysts and reporters into the field to pick the minds of investment experts on this investment option that is not quite popular among the ordinary investing public.
Apart from our research, which yielded some interesting insights, we also picked the minds of top fund managers, operators in the capital market and members of the Funds Managers Association of Nigeria (FMAN). We wanted to unravel so many questions on the concepts. We wanted to know, for instance: What is a mutual fund? How have they fared in Nigeria? What are the compelling reasons people should consider investing in mutual funds? What are the strategies for deciding the best funds to invest in? What is responsible for the low level of awareness of the investment instrument? What are the prospects? We posed those questions to as many of the operators as we could get, and we got answers to all.
One of our analysts pinned down Mr Aigbovbioise Aig-Imoukhuede, President of the Fund Manager Association of Nigerian (FMAN), who is also Managing Director of Coronation Asset Management Limited, who broke down the concept for us: “There are no requirements to invest in mutual funds. In terms of age, anyone can invest in mutual funds including minors (those below 18), although for minors, their parents or guardians will manage the investment on their behalf until they are of age.
“In terms of capital requirements, one doesn’t need much to invest in mutual funds, with as low as N5000, you can invest in some types of mutual funds, for example, money market funds. However, we do recommend that investors request and read available information about the funds they are interested in, which include the fund’s prospectus, trust deed, and fact sheets about the fund, before investing”.
Abimbola Olashore, former MD of Lead Merchant Bank and one of the experienced operators in the fund management industry stated that the beauty of investing in a mutual fund is that it gives the same rate of return to all investors irrespective of the volume of investment.
According to Olashore, Nigeria, where mutual funds are less accessible or established, has in recent times introduced this retail-friendly investment vehicle to a broader audience, democratising access to diverse portfolios and professional management.
Mr Yemisi Shyllon, an enlightened investor, however, warned investors not to invest in equity mutual funds because it has a very high risk amid the current business operating environment in Nigeria.
According to Shyllon, the debt mutual fund has numerous opportunities, and he recommended it for investors at this period, stating that the money market mutual funds have low risk, and of course, investors with small capital can invest.
We also asked Mr. Aig-Imoukhuede about the implication of the fluctuating fortunes relative to other currencies on the prospects of those investing in the naira-denominated variant of mutual funds. His answers were very reassuring: “Yes, there are dollar-denominated mutual funds in the market, and as of the 25th of August 2023, there were 20 SEC-licensed dollar funds with a combined Net Asset Value or NAV of N584.92 billion.
“The objective of dollar-denominated mutual funds is to provide investors with currency diversification access to a consistent income stream and long-term capital appreciation in dollars.
In addition, it is pertinent to note that dollar funds are open-ended funds that invest in a broad range of tenure US dollar-denominated debt securities issued by the Nigerian government and reputable corporate institutions, such as sovereign Eurobonds, corporate Eurobonds, money market instruments, and other asset classes permissible by SEC.”
In the special report, we also featured the top 10 operators in the market and equally picked the minds of many other top-level operators in the industry.
We highly recommend that you grab your copy of THISDAY tomorrow to find out what those gurus have to say about a concept that many believe is silently creeping into the investment arena in the country. Also, look out for the electronic version of the report.
