The Nigerian economy may be struggling to grow but fund managers appear to be enjoying a growth spurt so far this year. In the first 10 months of the year, total net asset under management grew by 42 percent as fund managers added almost N260billion to their mutual funds according to data compiled from the Securities and Exchange Commission (SEC).
As at the start of November, the total asset under management for Nigerian fund managers reached N881 billion, rising from N621.6 billion at the beginning of the year. The rapid growth in the mutual funds industry was skewed towards the money market and fixed income funds with both low risk funds accounting for up to 96 percent of the growth in the industry.
Money market funds which makes up 75 percent of the mutual funds industry in Nigeria saw its segment grow by 39 percent so far this year, as investors poured up to N181.3 billion into money market funds which have enjoyed double digit returns for years.
By the start of November, money market funds had grown to N646 billion, which was more than the size of the entire mutual industry at the beginning of the year.
Local investors’ interest in low risk investment opportunities showed even more in the fixed income segment as the total fixed income funds more than doubled since the beginning of the year.
Analysts attributed the renewed interest in long dated debt securities to the declines witnessed in the stock market so far this year which have pushed them to invest in safer financial instruments. Equity funds have declined by 15 percent so far this year.
Fixed income mutual funds grew by 117 percent, adding N66.4 billion in assets under management which took the fixed income funds to N123.3 billion.
Bond funds grew by 89 percent during the same period, adding N12.7 billion as investors’ appetite for bonds grew exponentially during the year. As at the start of November, the total bond funds under management in the industry was N27 billion.
With treasury and bond yields now declining, analysts now forecast a slowdown in the growth of money market and fixed income yields and more attraction to equity funds as a source for high returns.
“I think the mutual funds industry will continue to grow strongly over the next few months. We may not see large growth coming from money market or fixed income funds anymore due to the low yields now in the market. But I think the industry could easily add another N200billion,” said an asset manager.
IFEANYI JOHN
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