By Chinwendu Obienyi
The total assets under management (AUM) of Nigeria’s mutual fund industry rose by 46.5 per cent during the first 11 months of this year, data from the Securities and Exchange Commission (SEC) has revealed.
This signals a return to growth for the industry as savers became more aware of the value offered by the fund.
Investor’ sentiment have been impressive across the country’s financial markets due to policies implemented by President Bola Tinubu.
The equities market has been on a rollercoaster, gaining 40.30 per cent year-to-date (UTD) return.
Almost all the growth had come from just two types of fund: US dollar funds and Money Market funds.
The growth of Money Market funds is significant because they form the largest portion of the industry’s (39 per cent of total assets under management) and compete directly with Naira bank deposits for customers’ money.
Reacting to the development, analysts said if people are switching from bank deposits to money market funds for their savings, that was a good sign for the fund management industry and a good sign for savers, because money market funds tend to yield more than bank deposits.
Analysts at Coronation Research, said the growth in Money Market funds was attributable to poor interest rates on bank deposits (particularly in evidence at the beginning of this year); recent rises in market interest rates that increase investors’ returns; the success of fund management companies in making people aware of mutual funds.
“We were surprised to find that the value of Fixed Income mutual funds has fallen this year.
Only a part of this fall is attributable to the use of mark-to-market accounting (which only some funds use for their published data and which records price losses on bonds when interest rates go up). Perhaps it is the very unevenness of Fixed Income fund reporting – some funds report average yields while others report mark-to-market positions – that puts people off”, they said.
The growth in US dollar funds can be attributed partly to the effects of exchange rates, because the size of US dollar funds are recorded in Naira equivalents and the Naira declined from N460.82/$1 to N790.82/$1 between January 1st and December 1st.
=That 72 per cent move in the exchange rate expanded the Naira value of US dollar funds, but there was underlying growth of 32 per cent to bring the growth rate over 11 months to 126 per cent.
The industry has now recorded two successive years of real-term growth after the fall in 2021, when low market interest rates drove savers away from Money Market funds.
“Given recent rises in market interest rates, the prospects for further growth in 2024 look good”, they concluded.