By Peter Egwuatu

The monetary policy reform and increased participation of Nigerians in the diversification of their income stream have boosted investment in the Mutual Funds with the Net Asset Value, NAV, rising by 40.2%  in the seven  months ended July 2023.

The mutual funds investment window closed at N1.92 trillion last month as against N1.369 trillion in the corresponding period of 2022.

Investment analysts have attributed the increasing participation of the retail investors to monetary policy reforms that has seen interest rates on steady rise this year. They also noted the increased awareness on the part of the ordinary investors.

Mutual Fund is a professionally managed investment fund that pools money from many investors to purchase securities such as stocks, bonds, and short-term debt.

Analysis of the Mutual Funds investment show that the Money Market Funds led other Funds recording N847.9 billion and accounting for 44.1% of the total NAV.

It was followed by Dollar Funds recording N568.541 billion and accounting for 29.6% of the total NAV while Bond/Fixed occupied the third position on the chart posting N319.728 billion and accounting for 16.6 % of the total NAV.

Commenting on the rising profile of Mutual Funds, analyst and Vice Executive Chairman, HighCap Securities Limited, David Adonri, said: “The growth in NAV of Mutual Funds is impressive as it  over-performed the equities market which grew by 25.53% within  the period under review. It is around the same range as average yield on bonds which means that the funds were managed conservatively. They may have been weighted more towards debt.

‘‘The high interest regime and the recent monetary reforms by the present administration have also contributed immensely to attract investors into the market.”

On its viability in the financial sector, he said, “The future of Mutual Funds in comparison with other financial instruments is reasonably bright. They have their captive market which is the retail investment market.

‘‘Additionally, Mutual Funds are plentiful and structured to meet the differentiated needs of investors. Each Fund targets the risk tolerance of its investor group.

‘‘Their usefulness as portfolio diversification tool is unmatched in the capital market. They deal reasonably well with unsystematic risks and hence reliable tool for risk management. They are generally for passive investors.”

Also commenting, analyst and Head of Research and Investment at Fidelity Securities Limited, Victor Chiazor, 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.  The high interest regime has contributed to boost the market.

‘‘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 asset is as a result of the options which have become available to investors.”

He added: “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.”