Coronation Asset Management report shows growth potential of Mutual Funds

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Nigeria’s Mutual Fund industry requires several more years of growth to reach the Naira 12.3 trillion total size of Nigeria’s Pension Funds. Coronation Asset Management report has shown.

The report indicates that harmonising Mutual Funds reporting may be a difficult task in the country currently, but making the effort now will lead to the Funds becoming a significant force in Nigeria’s financial infrastructure.

The Coronation Asset Management report titled ‘Comparing Mutual Funds: Apples and Oranges; Why Harmonised Reporting Is The Next Step Forward’ addresses developments in Nigeria’s fast-growing Mutual Fund industry where the total assets under management grew by 50 percent to Naira 1.57 trillion in 2020.

Aigbovbioise Aig-Imoukhuede, managing director, Coronation Asset Management Mutual Funds in his address at the virtual media press conference Monday said there was financial growth in the Mutual Funds Industry.

Aigbovbioise said that Nigeria needs a standard form of reporting even as the industry grew by 50%, despite COVID-19.

Guy Czartoryski, head, research, Coronation Asset Management Mutual Funds, speaking during a virtual media briefing said that 2020 was a good year for mutual funds despite the outbreak of the COVID-19 pandemic.

Czartoryski said: “Last year, market interest rates fell precipitously, with the yield on a one-year Nigerian Treasury Bill (NTB) falling from 5.40 percent in January 2020 to 0.15 percent in early December 2020. It was difficult for investors to get good rates of interest from their bank deposits.”

According to him, initially investors turned to money market funds, which were the biggest segment of the Mutual Fund industry.

The report indicates that, “If Nigerian funds want to play in the international league, they need to adopt Global Investment Performance Standards (GIPS). Very few Nigerian fund managers apply GIPS at the moment. And Mark-to-Market Accounting is one of the cornerstones of GIPS”.

In the report, the research team examines what happens when an investor seeks comparative information on Mutual Funds and takes the example of Naira-denominated Fixed Income funds.

The results are surprising. The data reported by these funds is very diverse, with different accounting methods used to arrive at very different Unit Price performance data.

The report further indicates that the first step is to harmonise reporting among Nigeria’s Mutual Funds, adding that GIPS has to be a long-term goal because introducing GIPS is expensive and takes time to enforce and that harmonising the reporting of Nigeria’s Mutual Funds is a necessary step to creating comparable UP data and helping the industry to achieve its potential.

“In our view, Nigeria’s diverse measures stand in the way of the development of the industry,” says Guy Czartoryski, head of Coronation Research. “Although it is growing rapidly, we believe that Nigeria’s Mutual Fund industry requires several more years of growth to reach the Naira 12.3 trillion total size of Nigeria’s Pension Funds”.

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