By Tanko Mohammed
Coronation Asset Management on Tuesday said the country’s total mutual funds rose by 305 per cent in four years.
Mr Guy Czartoryski, Head of Research, Coronation Asset Management, disclosed this at the virtual launch of its report titled: “The Shifting Appetite of the Nigerian Investor: From Savings to Mutual Funds.”
Czartoryski said the total Assets Under Management (AUM) of Nigeria’s mutual funds (also known as collective investments schemes) rose by 305 per cent between 2015 and 2019.
He said investors were switching to mutual funds due to lower rates on savings accounts offered by commercial banks.
“As commercial banks progressively offered lower rates on savings accounts, more money switched to mutual funds.
“And the introduction of tech-based savings platforms introduces a new generation of young savers to mutual funds,” Czartoryski added.
According to him, mutual funds are growing rapidly and are quickly becoming the default destination for savings by Nigerians.
He said fixed income funds had picked up rapidly in the past two years, with growth at 59 per cent in the first half of 2020, while total value of money market funds appreciated by 11 per cent.
Czartoryski added that fixed income funds grew, from 2015 to 2019, at a Compound Annual Growth Rate of 82 per cent in inflation-adjusted terms and 111 per cent in nominal terms.
He noted that mutual funds were growing rapidly and becoming the default destination for savings by Nigerians.
“Just as the pension funds began to take off a decade ago, now mutual funds are growing fast.
“Mutual funds are set to become a large part of the savings industry.
“In a few years they may rival Nigeria’s pension funds in size,” he said.
He, however, identified risk management and information on fund performance as challenges facing the mutual fund industry.
“The mutual fund industry in Nigeria faces two challenges and the first is risk management.
“The era of high returns from Nigerian Treasury Bills ended in 2019.
“Today, investors need to invest in a variety of other asset classes to obtain a reasonable return, without becoming totally exposed to any one asset class.
“It means that investment management is more complex and more necessary than before,” Czartoryski said.
He added that there was need for more information on the performance of mutual funds in order to facilitate fund selection by investors and professional advisers.
“Fortunately, the industry and its regulator are moving in this direction, preparing the ground for a hugely expanded mutual fund industry in future, and creating the conditions for a significant capital base for the nation,” he said.
