Mutual Funds: Assets Under Management Hits N3.5trn In 2022

Agusto & Co. has estimated that Nigeria had N3.5 trillion ($7.8 billion) in assets under management (AuM) as at the end of 2022, in collective investments,  representing a 25 per cent increase from the prior year

Nigeria is the third largest investment management zone in sub-Saharan Africa, after South Africa and Morocco.

Agusto & Co, in a report, stated that, “this growth was driven in part by increased investor confidence following the gradual rise in the yields offered on naira-denominated investments during the latter half of the year and growth in dollar-denominated portfolios as discerning Nigerians hedge against the persistent devaluation of the naira.”

It stated that “nonetheless, despite Nigeria’s sub-population of 220 million people and the high foreign exchange remittance inflows from Nigerians living in the diaspora, the asset management industry continues to underachieve.

“The Industry’s growth remains constrained by a large informal sector (estimated at 65 per cent of GDP), a high poverty rate of 40 per cent and limited investment opportunities offered by the Nigerian capital market.”

The rating company noted that, “the challenging operating environment in Nigeria has led to an erosion of real incomes and purchasing power, prompting a surge in investors’ inclination towards dollar-denominated assets.

“The escalation of the year-over-year inflation rate from 15.6 per cent in January 2022 to 21.37 per cent in December 2022, is indicative of an unfavourable macro-economic climate. In addition, the parallel market exchange rate stood at N750/$ as at December 31, 2022, indicating a 63 per cent arbitrage from the official market rate and a 32 per cent depreciation from N570/$ recorded in the corresponding period of the prior year.

“In 2022, segregated portfolios accounted for more than half of total managed assets, which amounted to N1.76 trillion as at December 31, 2022, 40.2 per cent higher than in 2021, marking a noteworthy shift in the Industry as segregated portfolios overtook collective investment schemes (CISs) in terms of AuM share for the first time in three years.”

Agusto & Co. estimated that the Chartered Institute of Stockbrokers(CISs), accounted for 42 per cent of AuM in 2022, while alternative assets, comprising publicly-listed private equity and infrastructure funds, accounted for the remaining six per cent or N345 billion of the asset management industry’s managed assets as at the same date.

“Furthermore, segregated portfolios have continued to account for a large portion of the Industry’s AuM due to the large volume of funds invested by high-net-worth individuals (HNIs) and corporations seeking exposure to specific investment vehicles (in many cases regional Eurobond issuances).  These specific investment options typically offer relatively higher returns and provide a currency hedge, which may not be widely accessible with collective investment schemes.”

Going forward, Agusto & Co. anticipated a moderate increase in the size of the asset management industry, with an estimated average growth rate of 15.9 per cent over the next three years, saying this will result in total AuM reaching the N4 trillion mark by 2024,” it pointed out.