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Nigeria’s collective investment funds hit N1tr
#1
Nigeria’s collective investment funds hit N1tr
January 22, 2020
 
in BusinessInvestors


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[url=https://thenationonlineng.net/wp-content/uploads/2020/01/Nigeria-Investment.jpg]



 

Total net asset of collective investment schemes and funds in Nigeria hit a record trillion naira mark to N1.09 trillion as investors appeared to show increasing preference for professionally managed funds in the midst of the fluctuations in the financial markets.


Latest reports on collective investment schemes obtained by The Nation showed a 62 per cent increase in total net asset value and 10.1 per cent increase in total number of registered managed schemes in the country.

Total net assets value increased by N419 billion to N1.09 trillion while the number of registered managed funds rose by 10 to 98 schemes.

The reports coordinated by Nigeria’s apex capital market authority, Securities and Exchange Commission (SEC), included total net asset value of ordinary mutual funds, exchange traded funds (ETFs) and Specialist Fund (SF), altogether known as mutual funds or collective investment schemes (CIS).

The reports showed significant growths in both ordinary mutual funds and specialist fund but ETFs declined, underlying the dominance of ETFs by equities’ indices. The growth in the investment funds market was driven mainly by fixed-return segment as investors showed less appetite in an election year characterised by uncertainties.

Mutual funds or CIS are joint investment vehicles through which investors can pool funds and invest in chosen basket of securities with a view to optimise returns and reduce risks.

A mutual fund is usually categorised by the class of assets that forms the primary focus of its investments. Thus, there are equity funds, money market funds, bond funds, real estate funds, ethical funds, index funds, and mixed funds among others.

NAV is determined by subtracting total liabilities of a fund from its total assets. The NAV can further be divided by the total number of units of the fund to determine the unit price.

At the last count, total liabilities amounted to some 0.32 per cent of NAV, putting the total assets less than four steps to the trillion naira mark.

Total number of investment schemes rose from 89 on January 4, 2019 to 98 on January 3, 2020, according to reports provided by SEC. The growth was mainly in the ordinary mutual funds which rose from 79 to 88 as ETFs and SF remained unchanged at nine and one respectively.


Total net assets value rose from N671.03 billion on January 4, 2019 to N1.09 trillion by January 3, 2020, representing an increase of 62.4 per cent or N419 billion.

Ordinary mutual funds rode on the back of fixed-income and money market funds to N1.042 trillion as against N644.56 billion in the comparable period. SF doubled from N20.63 billion to N42.19 billion. ETFs, however, declined from N5.84 billion to N5.31 billion.

A breakdown of the funds showed strong and growing preference for funds that invest generally in fixed-income securities, especially short-term securities. The value and percentage of money market funds rose significantly over the period, accounting for nearly three-quarters of the total funds.

Money market funds, which invest mainly in money market instruments such as treasury bills, also remained the largest group of mutual funds, indicating the prevalent flight to safety by investors as sustained price depreciation weighed on equities market.

The NAV of money market funds rose from N487.56 billion to N764.71 billion. Fixed income funds-which invest in fixed-income assets, followed as the second largest group rising from N57.65 billion to N144.15 billion.

Bonds funds- named because they invest solely on sovereign and other approved bonds, leapt to third position from N14.36 billion to N49.36 billion. Real estate funds- which invest in real estate assets rose marginally from N43.53 billion to N44.96 billion. Specialist fund, which has only a fund investing in infrastructure, increased from N20.63 billion to N42.19 billion.

Further breakdown showed that mixed funds-which allocate funds between equities and fixed-income assets, declined marginally from N24.33 billion to N24.30 billion. The performance of the mixed funds apparently reflected the slowdown in the equities market as NAV for equity funds dropped from N11.89 billion to N10.91 billion.

Ethical funds-which include funds that do not invest in alcohols, cigarette, firearms and sometimes, in the case of Islamic ethical funds, in interest-based businesses, also declined from N5.23 billion to N4.55 billion.

Ethical funds typically include relatively large allocations to equities. ETFs, which are dominated by equities indices, declined from N5.84 billion to N5.31 billion.

Stanbic IBTC Money Market Fund remains Nigeria’s largest fund with NAV of N339.21 billion. FBN Money Market Fund followed with NAV of N202.45 billion. Stanbic IBTC Dollar Fund, a fixed-income fund, placed third with NAV of N82.1 billion.

ARM Money Market Fund ranked fourth with NAV of N80.68 billion while AXA Mansard Money Market Funds occupied the fifth position with NAV of N35.77 billion.

Investors in Nigerian equities had lost about N1.71 trillion in 2019 as a combination of political risk, weak macroeconomic performance and tense global outlook drove the stock market to second consecutive negative performance.

Nigerian equities closed 2019 with negative average full-year return of -14.60 per cent, equivalent to net capital depreciation of N1.71 trillion for the year. It had recorded negative average full-year return of -17.81 per cent in 2018.


 

The All Share Index (ASI)- the common value-based index that tracks all share prices at the Nigerian Stock Exchange (NSE) closed 2019 at 26,842.07 points as against its opening index of  31,430.50 points for 2019, which was also the closing index for 2018. It had opened 2018 at 38,243.19 points.

The negative average full-year return of -14.60 per cent in 2019 implied that investors in the Nigerian equities market lost nothing less than 14.6 per cent of their portfolios during the year. However, with higher losses in several sectors, actual losses by most investors may be higher than average benchmark.

The 2019 pricing performance marks the fifth negative closing in six consecutive years for Nigerian quoted shares. After a world-leading positive return of 42.3 per cent in 2017, Nigerian equities had reversed to negative in 2018 with average full-year return of -17.81 per cent.

Aggregate market value of all quoted equities at the NSE had declined by N1.889 trillion in 2018. The equities market had been on a losing streak since 2014. Investors lost N1.75 trillion in 2014 and followed this with another loss of N1.63 trillion in 2015.

Against the general expectation that political transition and new government will quicken a rebound, equities closed 2016 with a net capital loss of N604 billion.

NSE Chief Executive Officer, Mr Oscar Onyema said the performance of the fixed income market in 2019 showed a flight to safety by investors as quoted equities wriggled under fragile macroeconomic landscape denoted by uncertainties in fiscal and monetary policy direction.

He noted that the NSE launched a new trading platform for collective investment schemes in 2019 in order to enhance retail customer experience.

The new mutual fund trading platform facilitates electronic transactions with seamless connection among key parties in the transactions including the Exchange, Central Securities Clearing System (CSCS), stockbrokers and fund managers.

The NSE stated that the new platform aims to improve and enhance access of listed mutual funds to investors.  “The overarching goal is to enhance visibility for the listed funds and promote financial inclusion, while stimulating retail investor participation in our market,” the NSE stated
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