As Nigerians continue to widen their investment baskets in a move to diversify income outlets as the hard economy bites, there is an influx of funds into Mutual Funds, LEADERSHIP learnt.
Recent data reveals a significant trend among risk-averse investors, with approximately N1.2 trillion flowing into mutual funds.
This shift highlights a growing preference for safer investment avenues amid economic uncertainties.
Hence, the total value of investment in Mutual Funds rose by N1.212 trillion in the first eight months of 2024.
Nigerians’ investment appetite for mutual funds has surged as average Nigerian investors are diversifying their assets in a more secured option while sustaining an improved income stream.
Data released by the Security and Exchange Commission (SEC) as at August 30, 2024 showed that net asset value of mutual funds stood at N3.346 trillion as against N2.134 trillion achieved on December 29, 2023, showing a gain of N1.212 trillion.
Mutual Funds are professionally managed funds by asset management firms that pool funds from a group of people that are in low, medium and high classes and invest their money in venture capital, portfolio of stocks, bonds and other securities.
Analysts noted that the growth trend highlights a strategic shift by Nigerian investors seeking to hedge against rising inflation and exchange rate volatility.
The inflow into mutual funds is particularly noteworthy as investors look for high-yielding low-risk opportunities, gravitating towards money market funds and dollar-denominated instruments.
Review of the Funds during the period under review showed that Dollar Funds comprises of Eurobonds and Fixed Income rose by N869 billion or 115.71 per cent to N1.620 trillion on August 30, 2024 from N750.658 billion at which it opened for 2024.
Money market funds, which invest mainly in money market instruments such as treasury bills closed the period under review with N1.276 trillion from N881.603 billion, gaining by N394 billion or 44.67 per cent.
Ethical Funds recorded a year-to-date gain of 20.33 per cent or N893 million to N5.285 billion as at August 30, 2024, while Balanced Funds achieved 18.77 per cent gain or N7.986 billion to N50.542 billion.
Also, Equity Based Funds, Shari’ah Compliant Funds and Real Estate Investment Trusts gained N3.624 billion, NN5.17 billion and N336 million to close on August 30, 2024 at N28.028 billion, N51.239 billion and N97.022 billion respectively.
Meanwhile, Bonds and Fixed Income Funds primarily focus on debt securities declined by 24.02 per cent or a loss of N69.104 billion to close the period under review at N218.571 billion.
Speaking on the performance of Funds, the managing director of HighCap Securities Limited, David Adonri said, mutual fund investment has been widely embraced as a good investment platform in the developed economies, and serves as a vehicle for the mobilisation of capital for economic development.
He noted that the investors are now embracing mutual fund instruments to diversify their investment risks, especially in the equities market, since investments in mutual funds are like investment in a basket of securities.
Also, chief operating officer of InvestData Consulting Limited, Ambrose Omordion said, “investment in mutual funds has over the years continued to increase especially as more investors become aware of the options this asset class provides. Going by the fact that mutual funds invest in various asset classes and are managed by professionals, investors are becoming more comfortable around the idea of investing their funds in any mutual fund that meets their investment needs, be it an equity fund, fixed income fund or a balanced fund. The increase in net assets is as a result of the options which have become available to investors.”
Omordion stated that, “before now, mutual funds were a bit narrow and less understood by the market. As awareness increases, we have seen a rise in fund flow towards this asset class and in the medium term we expect this asset class to grow significantly especially given that the asset class is more liquid than other competing investments in the financial markets.”