NNPC report

Mutual funds net assets rise by N64.9b in first quarter

THE net value of all registered mutual funds in Nigeria rose by N64.9 billion to close the first quarter of the year at N686.485 billion, according to data provided by the Securities and Exchange Commission (SEC).

Latest report on net asset value (NAV) of mutual funds by SEC obtained by The Nation showed that net asset value (NAV) of mutual funds  rose from N621.59 billion by December 28, 2018 to close first quarter of the year at N686.485 billion, representing an increase of N64.9 billion or 10.4 per cent.

The report indicated that the number of mutual funds also increased from 80 funds in December 2018 to 82 funds in March 2019. The first quarter  represented 686.6 per cent increase on total NAV of N87.27 billion recorded by July 27, 2012.

Mutual funds, otherwise known as collective investment schemes (CIS), are joint investment vehicles through which investors can pool funds and invest in chosen basket of securities with a view to optimise returns and reduce risks.

NAV is determined by subtracting total liabilities of a fund from its total assets. It can further be divided by the total number of units of the fund to determine the unit price.

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 and balanced funds, among others.

A breakdown of the funds showed strong preference for money market funds, which invest mainly in money market instruments such as treasury bills. Money market funds accounted for N517.6 billion. Fixed income funds followed with N65.72 billion. Real estate funds placed third with N44.6 billion. Mixed funds-which invest in various assets across equities, money market and fixed income funds, among others, stood at N24.79 billion.

Further breakdown showed that investors’ values in bonds funds totalled N16.62 billion, equity funds and ethical funds accounted for N11.94 billion and N5.21 billion.

Stanbic IBTC Asset Management Limited (SIAML) remains the largest investment management firm in Nigeria with its funds dominating major segments of the market. Stanbic IBTC Money Market Fund is the largest CIS with NAV of N253.22 billion. FBN Money Market Fund, being managed by FBN Capital Asset Management Limited, ranked second with N137.5 billion; ARM Money Market Fund, being managed by Asset & Resources Management Company Limited, was the third largest CIS with N52.9 billion in NAV.

The Nigerian Stock Exchange (NSE) recently launched its new trading platform for mutual fund as part of efforts to boost investors’ participation in CIS. About five per cent of investors in the capital market engage in mutual funds, a paltry fraction that underlines the tendency of most retail investors to invest in the market directly.

NSE Chief Executive Officer, Mr Oscar Onyema, said the launch of the Exchange’s distribution and trading platform for mutual funds would not only provide an opportunity for the 256 brokers in the market to distribute to existing 13.9 million investors’ accounts in the Central Securities Clearing System (CSCS) but also attract new investors that may be interested in gaining exposure to the capital markets through mutual funds.

He said the new platform will enhance visibility for listed funds and promote financial inclusion, while stimulating retail investor participation in the market.

“This distribution platform is a new channel for accessing mutual funds which are listed on the NSE. This restates our commitment to provide market operators, issuers, fund managers and investors with a reliable, efficient and an adaptable platform to create a more transparent, liquid and accessible market in line with global best practices,” Onyema said.

According to him, the platform will facilitate electronic transactions with seamless connection between NSE, CSCS, fund managers and brokers as investors have the benefit of a single view of their mutual fund investment while being able to invest with multiple fund managers through a single broker.

He noted that in recent years, there has been significant increase in the number of mutual funds in Nigeria, an indication of the growing interest in collective investment schemes.

“However, there is significant room for growth in mutual fund assets, as the ratio of these to the Nigerian Gross Domestic Product is estimated at less than 1.0 per cent. As at February 18, 2019, the numbers of registered mutual funds with the SEC stood at 76 with NAV in excess of N600 billion. Of these registered funds, 47 are listed on the NSE memorandum listing platform. With the launch of this new distribution platform, we expect to receive more applications for listing of mutual funds,” Onyema said.

CSCS Managing Director Mr. Haruna Jalo-Waziri said the new platform marked another milestone for the Nigerian capital market as it will serve as a step towards improving the level of financial inclusion in Nigeria by giving investors varieties of investment products.

According to him, as part of its commitment to providing far-reaching benefits to the capital market, CSCS has proactively invested in technology that would enable us provides seamless post-trade services to a wide range of financial instruments including collective investment schemes.

“Additionally, fund managers can now augment their product distribution strength using the brokerage communities’ network. We believe this will also contribute towards increasing secondary market participation while growing funds under management for Asset managers,” Jalo-Waziri said.

Fund Managers Association of Nigeria (FMAN) President Mr. Dayo Obisan noted that one of the initiatives in the FMAN five-year road map was to develop and implement a nationwide distribution and trading platform for mutual funds.

Association of Stockbroking Houses of Nigeria (ASHON) Chairman Chief Patrick Ezeagu said stockbroking firms were delighted to have been a part of the development and emergence of the new trading platform.

According to him, the new platform was directed at reawakening the small savers in order to take advantage of investing through mutual fund and to have the synergistic benefit of a better return in the market.

“The memorandum trading platform will facilitate the ease of doing business in trading and distribution of mutual funds, it will inspire small savers thereby promoting financial inclusion which is an important focus of our members. We congratulate everyone that contributed to the success of this initiative and encourage all operators to embrace this new aspect of deepening of our market which is a formidable incursion into an erstwhile grey sector,” Ezeagu said.