Despite rising rates in mutual fund investments, a recent report revealed that more investors are now shifting their funds to this class of assets, resulting in a substantial increase in the portfolio.
Vanguard reported that the total value of assets in mutual funds increased Year-over-Year, by 41.2% to N2.1 trillion in the 10 months ending October 20, 2023, from N1.5 trillion in the equivalent period of 2022,.
The high yield on money market, fixed income, and bond funds, as well as the stock market’s positive performance and growing investor knowledge, are the main causes of the increase.
According to Vanguard’s analysis of data from the Securities and Exchange Commission, Money Market Funds led the increase, totaling N885.7 billion and accounting for 43.39% of the value of all mutual funds.
Subsequently, Income Funds recorded N631.778 billion, representing 31.55% of the Mutual Funds’ overall worth.
Third place went to Bond/Fixed Income Fund, with N297.314 billion, or 14.85% of the total value of Mutual Funds.
According to the breakdown of the rate of returns, during the period under consideration, the average yield for money market funds was 27%, fixed income funds were 13.7%, and bond/fixed income funds were 22.34%.
The CEO of MoneyCounsellors, Michael Oyebola, said in response to the developments in the mutual fund industry: “Over the past few years, the Nigerian mutual fund landscape has evolved significantly, transforming into a vibrant and accessible investment platform for both retail and institutional investors.”
Mutual funds give investors the chance to engage in the financial markets without requiring a great deal of expertise or experience by pooling money from different individuals and investing in a diverse portfolio of assets.
“A number of variables, such as the population’s growing financial literacy and the continued bull market, have contributed to the mutual fund industry’s significant expansion. Investors have also been pushed to pursue higher returns on their mutual fund investments.”
The Head of Research and Investment at FSL Securities Limited, Victor Chiazor, added, saying that return on investment is the primary motivator for any investment made by businesses or people. It makes sense for investors to look for higher-yielding assets and rebalance their portfolios if yields on any given investment decline.
Analyst and Vice Executive Chairman of HighCap Securities Limited, David Adonri, commented on the growing popularity of mutual funds, saying: “The yield in NAV of Mutual Funds is impressive, though the return for the equities market in the 10 months stood at 35.09%.
“The current administration’s recent monetary reforms and high-interest rate policy have also made a significant contribution to drawing investors into the market.”