Not too long ago, I broke the news that the Nigerian mutual fund asset had hit and surpassed the trillion Naira mark. A review and detailed analysis of the NAV Summary Report, a publication by the Securities and Exchange Commission, has disclosed that Nigerian mutual funds attracted N520 billion in contributions in 2019. That makes 2019 the year with the highest yearly contribution ever.
Increased awareness and the search for yield
The gigantic amount of contributions that the industry recorded in 2019 is not unconnected with the increase in awareness, occasioned by the numerous publications on mutual funds as well as enlightenment campaigns and advertisements by bloggers and fund managers.
Another factor that might have contributed to the increased contribution is the search for yield. The overall stock market was not that good in 2019, in fact, the Nigeria All Share index made a loss. The lackluster performance of the stock market pushed some investors to mutual funds, especially money market funds, thereby leading to increase in contributions to such funds.
Money market funds continue to be the darling of Nigerian mutual fund investors and the heartbeat of the industry. This resulted in much of the contributions making their way into money market funds. Of the three funds that attracted the highest contributions in 2019, Stanbic IBTC money market fund generated the highest contribution of N117.7 billionwhile FBN Money market fund gathered N109.6 billionin contributions.
Stanbic IBTC Dollar fund is the only non-money market fund that made it to the top 3 with a contribution of N59.4 billion. In all, money market funds saw a total contribution of N364.17 billion representing about 70% of the entire new money that was poured into mutual funds in 2019.
Fear of depreciation
Motivated by the desire to hedge against the depreciation of the local currency, the Nigerian Naira, investors seem to be getting to know and embrace Nigeria’s Euro bond funds, or funds that are denominated in foreign currency. The Euro Bond fund category generated a total contribution of N77.07 billion.
As noted already, Stanbic IBTC Dollar fund recorded the highest contribution in this category with N 59.4 billion. Currently, there are 7 Eurobond funds in Nigeria, according to the SEC NAV Summary Report. One advantage of investing in foreign-denominated mutual funds is that investors stand to gain not only from the performance of the funds but also from exchange rate changes.
Bond and fixed income funds not left out
Another category of mutual funds that attracted a sizable amount of new investments is Bond or Fixed Income funds. This category of mutual funds took in N44.47 billion in fund inflows, thanks to Stanbic IBTC bond fund that generated N10.88 billion to place itself on the record as the bond fund with the highest contribution in 2019.
Chapel Hill Denham Nigeria Infrastructure fund, the only fund in the infrastructure fund category, amassed total contribution of N23.05 billion to double its asset value in 2019.
There were redemptions too
It was not all that particularly rosy for the industry, as investors pulled out approximately N140 billion by way of redemptions from various mutual funds. FBN Money market fund suffered the largest redemption of N45.45 billion while Chapel Hill Denham Nigeria Infrastructure fund saw about N13 billion leaving.
Abacus Money market fund and Stanbic IBTC money market funds also witnessed an elevated amount of redemptions in the sums of N10.6 and N9.8 billion respectively. Just like money market funds recorded the highest amounts of contributions, they also suffered the highest amount of redemptions, although in no proportionate terms.
All said and done, the industry ended the year 2019 with net positive flow of N380.5 billion, to hit an all-time high of N1.042 trillion in asset value, placing the industry on a better footing for the future.