Popularity soared for the mutual fund industry last year as they were able to grow assets under management from N418.8 billion in January to N650.6 billion by November last year. Most of the fresh funds flowed into the fixed income mutual funds as double digits yields in debt securities incited investors to reduce allocation to equity funds and invest more in less volatile funds as equity-based funds fell from 3.36% of total mutual funds at the start of 2018 to 1.88 percent of total funds by November last year.
Fund managers were tasked with the challenge of managing half as much funds they were handling in 2017 at the end of 2018, with a capital influx of over N231.8 billion recorded as at November from the start of the year.
The asset under management (AUM) of the mutual funds grew by 55.3 percent at the start of November 2018. A mutual fund is an investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets.
According to the Securities Exchange Commission data analyzed by BusinessDay, Fixed income funds and money market funds were the top gainers with the highest inflow of capital. Funds like Chapel Hill Denham Money Market Fund, EDC Money Market Fund Class A, Greenwich Plus Money Market Fund and Stanbic IBTC Absolute Fund (Sub Fund) tripled their net assets in the last year. The combined net asset value of the four funds grew by N19.19 billion from N9.152 billion at the end of 2017. This growth represents 209.7 percent increase in net asset value of all the financial assets which the mutual fund manages on behalf of its clients and themselves.
The best fixed income mutual fund performance in the in terms of price change and value to its shareholders was the Nigerian International Debt Fund (15.2%), SFS Fixed Income Fund (12.84%) and Stanbic IBTC Absolute Fund (Sub Fund) (12.4%). Coronation Balanced Fund, Lead Fixed Income Fund and Stanbic IBTC Guaranteed Investment Fund concluded the list of mutual funds that performed above the 12 months average treasury bills rate of 11.01 percent.
Ayo Akinwunmi, Head of Research at FSDH Merchant Bank said the investment strategy and the investment tenor of the fund manager are important determinants of their return
“The ability of the fund manager to select stocks of investment instrument is an important factor in determining the return on that fund. Some fund managers are aggressive while some are a little bit conservative,” Akinwunmi said.
A further analysis on the mutual funds revealed that Money Market Fund had the highest share of the mutual fund market. Money market funds as a percentage of total mutual funds had a significant increase from 69.25 percent in December 2017, to 79.64 percent in 2018.