Despite the bullish Nigerian stock market’s trend in 2024, risk-averse investors funneled a staggering N3.830 trillion into mutual funds, LEADERSHIP checks have shown.
The Nigerian Exchange Limited (NGX) recorded a cumulative gain of 37.65 per cent in 2024, closing at 102,926.40 basis points at the end of the year. This performance was notable as it outpaced inflation, which was reported at 34.60 per cent by the end of November 2024.
While the stock market thrived, analysts projected continued growth for 2025. However, many investors remained cautious due to economic uncertainties and inflation concerns. The shift towards mutual funds reflected a broader trend where individuals prioritise security over potential high returns
Nigerians’ investment appetite for mutual funds rose to N1.696 trillion as investors hedged against rising inflation and exchange rate volatility in 2024.
Data released by the Security and Exchange Commission (SEC) as at December 27, 2024 revealed that the Net Asset Value (NAV) of mutual funds stood at N3.830 trillion as against N2.134 trillion achieved in December 29, 2023, showing a gain of N1.696 trillion. When compared to the performance in 2023, NAV grew by N723 billion.
Mutual Funds are professionally managed funds by asset management firms that pool funds from a group of people that are in low, medium and high classes and invest their money in venture capital, portfolio of stocks, bonds and other securities.
Review of the Funds showed that Dollar Funds comprised of Eurobonds and Fixed Income rose by N958 billion to N1.709 trillion on December 27, 2024 from N750.658 billion at which it opened for 2024.
Money market funds, which invest mainly in money market instruments such as treasury bills rose by N799 billion to N1.681 trillion from N881.603 billion, while Balanced Funds increased by N12.162 billion to N54.718 billion in 2024.
Also, Equity Based Funds, Shari’ah Compliant Funds, Real Estate Investment Trusts and Ethical Funds recorded a growth of N6.839 billion, N6.278 billion, N3.26 billion and N1.492 billion respectively.
Meanwhile, Bonds and Fixed Income Funds primarily focus on debt securities declined by N91.375 billion to close 2024 at N196.3 billion from N287.675 billion at which it opened for the year.
Analysts noted that the growth trend in 2024 could be partly attributed to the impact of naira devaluation on dollar-denominated funds as investors look for high-yielding low-risk opportunities, gravitating towards fixed-income and dollar-denominated instruments.
Speaking on the performance of Funds, the managing director of HighCap Securities Limited, David Adonri said, mutual fund investment has been widely embraced as a good investment platform in the developed economies, and serves as a vehicle for the mobilisation of capital for economic development.
He noted the investors are now embracing mutual fund instruments to diversify their investment risks especially in the equities market, saying that investments in mutual funds are like investment in a basket of securities.
Also, chief operating officer of InvestData Consulting Limited, Ambrose Omordion said “investment in mutual funds has over the years continued to increase especially as more investors become aware of the options this asset class provides. Going by the fact that mutual funds invest in various asset classes and are managed by professionals, investors are becoming more comfortable around the idea of investing their funds in any mutual fund that meets their investment needs, be it an equity fund, fixed income fund or a balanced fund. The increase in net assets is as a result of the options which have become available to investors.”
Omordion pointed out that, “before now, mutual funds were a bit narrow and less understood by the market. As awareness increases, we have seen a rise in fund flow towards this asset class and in the medium term we expect this asset class to grow significantly especially given that the asset class is more liquid than other competing investments in the financial markets.”
A senior broker, Tunde Oyediran added that, “over the years, there has been a significant increase in the number of mutual funds as investors interest increases. Mutual funds have become a vehicle used by both advisors and institutions to access investible funds and diversify portfolios.”
He emphasised that despite the performance of mutual funds, there is still a need for the government and financial/investment houses to sensitise the public of the need of alternative investments such as mutual funds, the benefits, saying that “this will create awareness in the market and go a long way in creating strong relationship between the investors and investees.”
