Mutual funds, a growing investment option in the aftermath of the stock market crisis, has grown in leaps and bound with a net value of N109.4 billion, as of March 28, 2013.
The growth, according to investigations, is being driven largely by investors’ quest for safety and better returns on their investments (RoI), which translated to huge portfolio expansion and diversification.
In the last three years, the financial market has continued to record new fund portfolios, numbering nine at the last count, which indicates a growing appetite for safety and better RoI.
Mutual funds are a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities. While there is no legal definition of the term “mutual fund,” it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public.
They are sometimes referred to as “investment companies” or “registered investment companies.” Most mutual funds are “open-ended,” meaning investors can buy or sell shares of the fund at any time.
According to BusinessDay’s analysis of the nine categories of fund operated currently, Equity Based Funds are the highest traded funds with 19 fund managers pooling a net asset value of N42.12 billion as of March 28, 2013. This is followed by Money Market Funds in terms of value, amounting to N16.63 billion, where three fund managers traded.
The Bond Fund within the period under review recorded a net value of N16.49 billion, where nine fund managers played, whereas Real Estate Fund N16.08 billion. This is followed by Balanced Based Fund, Ethical Fund, Sector Fund, Umbrella Funds and Exchange Traded Funds, which recorded N10.72 billion, N6.85 billion, N2.43 billion and N372 million, respectively.
Stanbic IBTC Asset Management Limited is the largest fund manager with net asset value of over N37 billion or 34 percent of the total net asset value of all traded funds in the financial services market, during the period under review.
Figures in the period under review show Stanbic IBTC’s dominance in Equity Based Funds, Money Market Funds as well as in Umbrella Funds. However, it currently manages six open-ended Mutual Funds regulated by the Securities and Exchange Commission (SEC) namely:
The Equity Based Fund commenced operations in 1997. The units of the fund were issued at an initial price of N1, 000 per unit and the offer price is presently in excess of N11, 000. The equity fund is mainly capital market based and requires a minimum subscription of N50,000, while principal investment is guaranteed for a minimum of three months. The primary objective of the fund is to achieve long-term capital appreciation by investing in high quality securities quoted on the Nigerian Stock Exchange and in other instruments approved by SEC.
ARM Aggressive Growth Fund is the second largest mutual fund after Stanbic IBTC Asset Management Limited. Managed by ARM Company Limited, the firm was established in 2004 and commenced operations in 2005. The fund is designed for investors with the primary goal of achieving capital appreciation and having above average appetite for risk, for the possibility of higher returns in the long term.