• Tuesday, May 21, 2024
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Mutual Funds are generally less risky and provide an opportunity for investors

Tope Omojokun (1)

Investment One Funds Management Limited, a wholly-owned subsidiary of Investment One Financial Services Limited. The company is licensed by S.E.C to manage Mutual funds/Collective investment schemes and also provides investment products that are tailored to meet the unique investment needs and goals of their clients. Tope Omojokun, managing director of Investment One Funds Management , in this interview with DOLAPO ASHIRU speaks on the various issues regarding the Funds Management sector of the Nigerian economy.

Kindly intimate us of your mutual funds and underlying investment philosophy

Mutual Funds are generally less risky and provide an opportunity for investors, commonly referred to as Unitholders, to capitalize on the power of pooling funds and skills of the Fund Manager to achieve their investment objectives/goals. The unitholders own all the underlying assets and the returns generated by the assets in the Mutual Fund less fees.
Mutual Funds cater to investors with different risk and return objectives, religious beliefs, age groups and income levels. The various Funds assist investors to achieve; capital preservation, income-generation and capital appreciation through investments in financial instruments such as money market instruments, bonds, stocks and other alternative asset classes depending on the objective and investment strategy of the Fund.
Mutual funds can either be opened or closed ended. In Nigeria, there are several categories of mutual funds. These include: Money Market Funds, Fixed Income Funds, Real Estate Funds, Mixed Funds, Infrastructure Fund, Bond Funds, Equity Based Funds, Exchange Traded Funds (ETF), Ethical Funds

What are the challenges affecting the fund management industry in Nigeria, how have you been able to manage the risks inherent?

The challenges affecting the industry are: Knowledge gap/low investor education, High level of risk apathy and Distribution: as Mutual funds are sold not bought.
We have managed these challenges through advocacy and investor education. The risks inherent are dependent on the underlying assets which would be discussed subsequently

What are the average returns across the various asset classes of the types of mutual funds you mentioned earlier?

Mutual funds in Nigeria are broadly categorized as Money Market Funds (MMF), Fixed Income Funds (FIF), Balanced/Mixed Funds (BF), Pure Equity Funds (PEF), Dollar Denominated Funds (DDF), Shariah Compliant Funds (SCF).
The asset mix/allocation of these various categories as approved by the Securities and Exchange Commission (SEC) are specified in the Trust deeds of the various funds. Over 70% of the Net Asset Value (NAV) in the industry is accounted for by MMFs. These are invested in a broad range of money market securities such as Treasury Bills, Commercial Papers, bank placements, etc. and offer relatively higher interest rates when compared with rates on savings accounts with commercial banks. It is noteworthy to mention that Money Market funds in Nigeria are rated by a SEC approved risk rating company. The industry average net return is currently about 13% per annum as per daily price list for mutual funds published by the Funds Managers Association of Nigeria (FMAN). The current performance does not guarantee future results.
For other categories of mutual funds, bid and offer prices per unit change daily as they are determined by the values of the underlying assets in the portfolio and total number of units of the Fund.

How would you rate the participation of retail investors in fund management, what can drive their participation?

The level of participation by retail investors in Nigeria is still very low with the bulk of investments attributed to institutional participation. There is need to create a lot more awareness across all level levels. Our regulators – the SEC has been driving financial literacy and is encouraging capital market operators to do likewise. Tools including virtual simulators, publications, seminars/forums, and platforms such as social media, webinars, short educational videos and so forth, could be used to drive investment education. Likewise, the use of Unstructured Supplementary Service Data otherwise known as USSD codes and strategic alliances can also trigger higher retail participation.
Influx of Fintechs’ in Nigeria and their millennial-appeal cannot be ignored; a lot can still be done to attract this segment.

Is there a best mix or ratio in creating portfolio for clients, how do you advise their allocation of resources across assets?

The asset mix that can be prescribed is dependent on a number of factors some of which include: The client’s risk profile, The life cycle stage, Time horizon, Objective/ Purpose etc.
It is important to take cognizance of these factors when recommending any type of mutual fund.

How do you intend promoting financial inclusion in Nigeria

The Securities and Exchange Commission (SEC) and Fund Managers Association of Nigeria (FMAN) amongst others are part of the National Financial Inclusion Steering and Technical Committees. The Financial Inclusion strategy was adopted by the Central Bank of Nigeria (CBN) in 2012 to provide the road map that will guide and support stakeholder activities in advancing financial inclusion in the country. This strategy was created with defined KPIs based on access, usage, affordability, appropriateness, financial literacy, consumer protection and gender.
This platform is very laudable as it has created a path for Fund Managers to follow in terms of promoting financial inclusion in the system.
As a company, we use a number of channels to drive financial literacy – with emphasis on investment education at the retail level. Technology has also become a necessity and an enabler in this respect.

What role does technology play in improving efficiency and service delivery?

Technology allows providers ease of carrying out transactions. The swiftness, traceability and accountability promotes business efficiency and endears trust from investing public.

Financial literacy is low in Nigeria hence a poor savings culture, what are the programs you have to improve this culture?

Education – starting from primary schools, then universities and advocacy in workplaces