By NKIRUKA NNOROM
Operators in the capital market have renewed their call for local investors, especially retail ones, to access capital using the Collective Investment Scheme, CIS, as an option.
They noted that leveraging the collective investment scheme would reduce the level of exposure to risks and ensure that their investments are managed professionally.
According to the Group Chief Executive Officer, Mrs. Oluwatoyin Sanni, investing through fund managers remained a better option for retail investors because the fund managers are better placed to maximize investments opportunity the way an individual investor cannot.
She observed that investors tend to shun the CIS due to inadequate knowledge, urging the fund managers to do more to create awareness of how the market could be accessed through the CIS.
Sanni explained that the Funds pooled through the fund managers have separate custody just as the Pension Fund, adding that there is also a separate trustee that handles any complain or challenges from the fund manager to the regulator. She acknowledged that earlier, the CIS that were introduced in the market were not properly managed and were not adequately supervised and so, investors had nasty experiences.
But, she added that the regulators have gone much further to put in place very effective mechanisms through which the schemes are now managed. “And, I think it is very, very safe to invest in CIS now” the United Capital boss said.The Managing Director Cranes Securities Limited, Mr. Mike Ezeh in his own contribution said that although mutual fund does not enjoy the kind of patronage equities enjoy, it is a very good investment option to explore the market.
He encouraged investors to take advantage of the depression in stock prices to buy units of well-managed mutual funds in order to benefit from the capital appreciation over time. Ezeh explained that while investors rarely patronize mutual funds in Nigeria, participation in some other financial markets is higher through mutual funds rather than by direct investment in equities.
For instance, in Brazil, 10 million more investors participate in the market through mutual funds, while only 500,000 invest directly in the market, he said. Explaining how CIS works, Ezeh said by pooling funds of several individual and corporate investors, it gives investors access to investments that they will ordinarily not have access to.
“Unlike equities, a CIS is generally not traded on a Stock Exchange but investors buy and sell units to/from the fund manager at any time. Shares are created and sold to new investors on a continuous basis so you can either invest a lump sum or on a regular monthly basis,” he said. According to him, the operation of the entity is based on the principle of the diversification of risk.
Speaking in the same vein, Deputy Managing Director, ARM Securities, Ms. Jumoke Ogundare said that mutual fund subscribers in Nigeria presently stands at 250, 000 in spite of over 160 million of its population. Delivering a lecture on the theme ‘Collective Investment Schemes (CIS) in Nigeria’, Ogundare explained that CIS is an open ended collective investment scheme that issues redeemable units and invests primarily in transferable securities or money market instruments.
Listing the benefits of CIS, she said it reduces investment risk through diversification, lowers transaction costs, while less sophisticated investors obtain the opportunity of higher returns by having a registered professionals manage their investments and re-investment of income.