The state of the Nigerian Mutual Fund industry in H1 2021

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A lot has happened in the World Economy since the beginning of the year, 2021. Covid-19 and the ills that came with it appears to be abating on some fronts as the world strives to return to normal. Donald Trump left the White House, Angela Dorathea Merkel bowed out after a globally acclaimed job well done for Germans, Prince Phillip bade the World goodbye, and a lot more.

Back home in Nigeria, a lot has changed too since the beginning of the year. Dr Ngozi Okonjo-Iweala assumed the highest office in the WTO Secretariat, the Nigerian military lost its highest commanding officer even as insecurity continued to hold sway and ravage the country, and the Naira continues its journey to the south.

Those are just a few in the laundry list or litany of events that underscored the first half of 2021.

One industry that was part of the dynamics in the country within the period under review is the mutual fund industry. Unfortunately, not a lot is being reported on this industry when compared with reportorial and analysis on the Nigerian Stock Market. So, here are a few things that happened to the industry in H1 2021.

Asset Size

The combined asset of Nigeria’s mutual funds decreased by 12.71% or N199.8 billion. Using the June 25th NAV Summary report released by the Securities and Exchange Commission as a proxy for the end of quarter report, it was determined that the combined asset of mutual funds went from N1.57 trillion as at the end of December 2020, to N1.37 trillion as of June 25th 2021.

Flows

The combined outflow or redemption is estimated at N481.1 billion while the combined inflow amounted to N269.4 billion leaving the industry with a net outflow of N211.7 billion. This shows that investors redeemed twice as much money as they invested within the first half of the year.

New Funds

The industry saw 12 new funds being added to the NAV Summary Report, bringing the total funds on the report to 128.

Profitability

Within the period under review, the combined profits or gains made by mutual funds in Nigeria is estimated to be N11.9 billion. The profits were driven by good performances from Fixed income funds, Bond funds and Dollar funds which garnered some gains from the depreciating value of the Naira.

Other Notable Highlights

Equity Funds

The combined assets of Equity funds decreased by 2.32% from N30.8 billion to N30.1 billion after suffering estimated redemption of N2.7 billion and attracting new investments in the amount of N1.9 billion and N258 million in gains.

Bond Funds

The combined assets of Bond funds decreased by 4.45% or N29 billion, from N491.4 billion to N469.5 billion after suffering estimated redemption of N167 billion and attracting new investments in the amount of N148 billion.

Real Estate Funds

In what may have come as a surprise, the combined assets of Real Estate funds increased by 17.64% or N7.5 billion, from N42.3 billion to N49.7 billion after an estimated redemption of N608 million and N9 billion in subscriptions with N958 million in losses.

Balanced/Mixed Funds

The combined assets of Balance or mixed funds decreased by 3.36% or N449 million, from N13.3 billion to N12.9 billion after suffering estimated redemption of N3.2 billion and attracting new investments in the amount of N2.6 billion and N136 million in gains.

Ethical Funds

The combined assets of Ethical funds decreased by 8.22% or N1.02 billion, from N12.5 billion to N11.5 billion after suffering estimated redemption of N5.7 billion and attracting new investments in the amount of N4.7 billion and N111 million in losses.

Exchange-Traded Funds

The combined assets of Exchange-Traded funds decreased by 35.6% or N7.01 billion, from N19.9 billion to N12.8 billion as a result of an estimated redemption of N15.2 billion, while attracting new investments in the amount of N8.5 billion and N431 million in losses.

Eurobond/Dollar Funds

As expected, the combined assets of Eurobond/Dollar funds increased by 33.14% or N53.6 billion, from N166.9 billion to N220.6 billion after suffering estimated redemption of N13.3 billion and attracting new investments in the amount of N60.9 billion and N5.9 billion in gains.

Infrastructure Funds

Infrastructure fund asset value increased by 32.63% or N19.1 billion, from N58.6 billion to N77.7 billion after suffering no redemptions and attracting new investments in the amount of N19.2 billion and N84 million in losses. There is only one fund in this category though.

Target Date Funds

The combined assets of Target Date Funds decreased by 22.03% or N91.1 million, from N414.8 million to N322.6 million after suffering N114.4 million in redemptions and attracting new investments in the amount of N65.4.2 million and N42.2 million in losses.

Conclusion

Going by the number of new funds that got added to the list of mutual funds in Nigeria in H1 2021, one would say that the industry is alive and well. However, seeing how much redemption the industry suffered compared with additional investments generated, one may not be that quick in saying that the industry is alive and well.

Investors should rebalance their funds or reallocate their fund investments among mutual funds and not redeem out of the industry as a whole, after all, there are fund categories that generated good gains as noted above. The rate at which investors are redeeming from their mutual fund holdings is quite concerning and if that continues, the industry may be spoken of in the past tense in future.

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