August 18, 2022/CSL Research
According to data from the Securities and Exchange Commission (SEC), the total Asset Under Management(AUM) of the Nigerian Collective Investment Schemes (excluding Infrastructure Funds) rose by 4.25% ytd to N1.37trn as of July 29, 2022, from N1.31trn on December 31, 2021.
The increase in total Net Asset Value was supported by a mix of new listings and earnings on investments as weighted average yield stood at 5.15% as of July 29, 2022. However, we note that the total Net Asset Value having peaked at N1.44trn as of May 13, 2022, assumed a steady decline partly in line with the lacklustre performance of the equities market and decline in Eurobond prices.
The Russia-Ukraine war remained the dominant trigger of selloffs across various asset classes particularly on the dollar denominated instruments with direct exposure to global market forces.
The data showed that the money market funds dominated, with 40.94% share and up 2.31% ytd to N560.57bn as of July 29, 2022, from N547.91bn at the end of December 31, 2021. bonds/fixed income funds followed with 29.33% share, up 6.33% ytd to N401.66 bn as of July 29, 2022, from N377.74bn in December 2021. Likewise, Dollar Funds took 21.36% share, up 7.47% ytd to N292.53bn as of July 29, 2022, from N272.19 bn as of December 31, 2021.
Collectively, money market, bonds/fixed Income and dollar funds constituted 91.64% of mutual funds. On the other hand, Equity Funds remained relatively low at 1.17% share having grown marginally by 2.08% ytd to N16.08 bn as of July 29, 2022, from N15.76 bn as at December 31, 2021.
In terms of yields (price appreciation), Ethical Funds appeared most profitable at 11.96% on 29 July 2022, albeit, lower than 12.35% as of December 31, 2021. Shari’ah Compliant Funds followed with an average of 8.72% yield in the same period, compared to 8.68% at the end of December 31, 2021. Yields on Equity Funds, Money Market and Fixed Income Funds stood at 6.91%, 6.60% and 4.04% respectively as of July 29, 2022. Like the PFA portfolios, the Nigerian Mutual Funds’ portfolios remain highly skewed towards riskless FGN instruments and money market instruments which almost all earn negative real interest rates, considering inflation at
18.6%. There is therefore opportunity for innovations and development of new products that could generate decent inflation-adjusted returns.
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