By Nkiruka Nnorom
Equity researchers at Coronation Asset Management, a subsidiary of Coronation Merchant Bank, have disclosed that Mutual Funds’ Assets Under Management (AuM) has reached N1.3 trillion as at the end of June 30, 2020 following declining interest rate in the money market.
They said Mutual Funds’ AuM is set to surpass Pension Fund assets, which currently stands at N11.09 trillion, given shifting investors’ appetite to the asset class over declining interest rate.
Guy Czartoryski, Head of Research at Coronation Asset Management, who stated this at a virtual press conference to present a research report on Managed Funds in Nigeria published by the company, said that mutual fund asset is set to outpace pension fund asset in the next 10 years given increasing level of interest in the asset class.
The Central Bank of Nigeria (CBN) has been taking several measures to encourage lending to the real sector in order to boost the economy post-Covid-19, one of the measures being reduction in interest rate.
In the report themed, ‘Shifting the Appetite of Nigerian Investors: From Savings to Mutual Fund’, Czartoryski said: “We are leaving behind a period when interest rates were so high that bank deposits provided the default for Nigerians’ savings. Over the period 2010 to 2019, T-Bills rates generally were 2.57 percentage points above inflation. This is no longer the case. As interest rates have come down, savers have been turning to Mutual Funds to manage and protect their money.
“Total assets under management over the four years 2015 to 2019 more than doubled in inflation-adjusted terms and were up 305 percent in nominal terms. The Compound Annual Growth Rate (CAGR) in total AuM from 2015 to 2019 was 22 percent in inflation-adjusted terms and 42 percent in nominal terms.
“It would be difficult to find a Nigerian industry that matches this. At the moment, this industry is only about one tenth the size of the Pension Funds, it is growing fast. Money Market Funds grew at a CAGR 28 percent in inflation-adjusted terms and 49 percent in nominal terms, than the fund management industry as a whole from 2015 to 2019. They grew by 11 percent in the first half of this year.”
“Fixed income funds grew at a CAGR of 82 percent in inflation-adjusted terms and 111 percent in nominal terms within the same period. Growth has picked up rapidly in the past two years with growth at 60 percent during H1’20 in nominal terms.”