Coronation makes case for investments in balanced funds

With headline inflation at a 17-month high, investment experts said a balanced fund is a necessary measure to mitigate the risk of loss.

Coronation Asset Management Limited and Coronation Securities Limited highlighted the need for more Nigerians to embrace balanced funds at a webinar, themed ‘Best of Both Worlds from Equities and Fixed Income – a Balanced Fund’.

The financial institutions convened a panel of investment experts to interrogate risk and growth in Nigeria’s currently volatile, high-interest-rate investment environment.

The virtual event featured an address delivered by Mounir Bouba, a chief investment officer of Coronation Asset Management; and a panel of discussants made up of Sunmbo Olatunji, group treasurer of Access Bank; Dele Akintola, the chief commercial officer of Alerzo; Taiwo Olatunji, head of investment banking at Coronation Merchant Bank. It was moderated by ‘Jibola Odedina, chief executive officer of Coronation Securities as moderator.

In his welcome address, Aigbovbioise Aig-Imoukhuede, managing director/chief executive officer of Coronation Asset Management, said the net asset value of Nigerian mutual funds has grown by 30.9 percent since 2012, largely driven by growth in money market funds and fixed income funds.

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He noted that, however, by contrast, balanced funds which leveraged both equities and fixed income asset classes grew by 5.8 percent over the same period, accounting for only 2 percent of the net asset value of Nigeria’s mutual fund industry.

“Given the ability of balanced funds to deftly integrate risk management with growth, it was surprising, especially in the current high-risk environment characterised by value erosion and elusive growth, that more Nigerians were not considering balanced funds,” said Aigboje.

In his address, Mounir explained how balanced funds successfully deliver on both growth and income objectives by investing in a portfolio of equities and fixed income securities.

He said for average Nigerians, “balanced funds provide a one-stop shop to the acquisition and management of multiple funds, while also providing a single point to monitor them.”

Mounir addressed the impact of inflation on investing and unpacked the drivers of volatility in the current market.

Speaking during the panel discussion session, Taiwo advised savers and investors to put their money in funds managed by experts.

“Fund managers are very useful. They have their own place in helping people who are starting out with investing to grow their income to a certain point whereby they can now do bigger things with it,” he said.

Speaking further about the benefits of the balanced fund, Sunmbo said bad performance in the fixed-income asset class may be offset by a stronger performance in equities and vice versa, by blending income stabilising bonds and growth-leveraging equities.

All panelists agreed that balanced funds offer the best risk-growth proposition in the current period of economic downturn.