By Chinwendu Obienyi
The total net asset value (NAV) of mutual funds in Nigeria’s capital market increased by 24.9 per cent and now stands at N2.54 trillion at the end of the first quarter (Q1) of 2024, data from the Securities and Exchange Commission (SEC) revealed on Monday.
Nigerian mutual funds recorded an average return of 10.76 per cent in Q1 2024, largely driven by the 30.89 per cent yield printed by ethical funds during the period. Additionally, total Net Asset Value (NAV) also increased by 24.9 per cent in the review period, representing N507.6 billion addition from the initial N2.04 trillion recorded as of the end of December 2023.
Hence, the NAV as of the end of March 2024 stood at N2.54 trillion, the data garnered from SEC’s website revealed.
The 10.76 per cent return recorded in the first three months of the year, is already more than half of the 18.46 per cent return printed in the whole of 2023. The positive movement in the mutual funds was majorly due to bumper yields on ethical (30.89 per cent), equity based (18.6 per cent), and balanced funds (15.23 per cent).
For context, ethical mutual funds are investment entities that seek to generate profits by investing in companies that adhere to specific ethical and social criteria. Typically, these funds allocate their investments to companies that exhibit dedication to environmental sustainability, social equity, and ethical governance practices.
In the same vein, the rally in the Nigerian equities market also supported the returns in mutual funds. Notably, the All-Share Index (ASI), which measures the performance of the equities market gained 39.84 per cent to close the review quarter at 104,562.06 points.
Also, high yields in the fixed income market, following a 600 basis points (bps) hike in the Monetary Policy Rate (MPR) by the CBN, contributed to the yields printed in Nigerian mutual funds during the quarter under review.
For example, the fund category recorded an average yield of 15.23 per cent during the review period with an NAV of N49.91 billion. Bond or Fixed Income funds which are mutual funds that allocate their investments to a selection of debt instruments issued by various entities, including governments and corporations, recorded an average year-to-date return of 6.01 per cent with an NAV of N271.66 billion.
Dollar funds instruments which include Eurobonds, US dollar bank deposits, and other similar assets recorded average returns for the review period at 2.55 per cent (Eurobonds), 4.43 per cent (Fixed income), with NAV of N338.3 billion and N882.7 billion respectively.
Equity based mutual funds recorded average yield of 18.6 per cent with an NAV of N28.49 trillion. Average returns on ethical for the review period was 30.89 per cent with a Net Asset Value of N5.22 billion while average yield on money market funds was 13.62 per cent with an NAV of N919.5 billion.