Nigerian Mutual Funds lost an estimated N1.8 billion in the first quarter of 2016, according to analysis conducted by Quantitative Financial Analytics on the basis of NAV Summary data report released by the Security and Exchange Commission, SEC for April, 1 2016. Interestingly, increased inflows, mostly in the money market funds, ensured that the total Net Asset Value of the funds continued in the ascendency. According to the April 1 NAV summary Report, the total NAV of mutual funds in Nigeria stood at N294.71 billion, an increase of 11.43% from the December 31 2015 NAV of N264.47 billion. Within the period under review, investors injected an estimated sum of N46.9 billion and withdrew N14.8 billion, leaving a net inflow of N32.1 billion.
|Fund Type||Beg Value||Estimated Contributions||Estimated Withdrawals||Net Flow||End Value||Gain||%Gain||%Gain-(NAV)|
|EQUITY BASED FUNDS||27,120,405,676.31||658,317,795.42||747,040,466.80||-88,722,671.38||25,373,715,732.04||-1,657,967,272.89||-6.09||-6.4|
|MONEY MARKET FUNDS||149,385,899,146.45||39,536,866,037.56||11,589,028,560.21||27,947,837,477.35||177,351,300,922.51||17,564,298.71||0.01||18.72|
|REAL ESTATE FUNDS||45,443,365,169.41||431,814,178.35||516,375,383.91||-84,561,205.56||45,679,053,321.43||320,249,357.58||0.71||0.52|
|BALANCED BASED FUNDS||9,959,115,424.67||68,354,861.65||252,591,477.77||-184,236,616.12||9,436,600,387.75||-338,278,420.80||-3.46||-5.25|
|ETHICAL BASED FUNDS||4,736,354,805.35||118,842,787.14||162,749,837.20||-43,907,050.06||4,511,062,086.85||-181,385,668.44||-3.87||-4.76|
|EXCHANGE TRADED FUNDS||4,099,066,679.70||40,053,448.78||127,095,669.33||-87,042,220.55||3,665,730,470.99||-346,293,988.16||-8.63||-10.57|
|Source: Quantitative Financial Anlytics/SEC|
Fund Type Analysis:
Expectedly, the worst hit fund type is Equity based funds which lost N1.65 billion in 2016Q1, it also suffered a net outflow of about N88.7 million to end the quarter with a NAV of 25.37 billion from N27.12 billion as at the beginning of the quarter. That means that the Equity funds made a loss of 6.09% but witnessed a decrease in NAV of 6.44%. Within this period, the Allshare Index lost 11.65%.
Balanced Funds recorded a loss of N338 million which combined with its net outflow of N184 million to bring down its NAV or AUM to N9.4 billion from its beginning of quarter N9.96 billion NAV. This represents a 5.5% reduction in AUM. In the same way, Ethical funds saw their total NAV decreasing by N225 million from N4.7 billion to N4.5 billion due to a combined loss of N181 million and net outflow of N43.9 million.
Not even the good run by NewGold Etf could save the Exchange Traded Fund category from the bloodletting. By the end of the first quarter, the ETF category lost N346 million of its beginning of quarter value to end Q1 with a total NAV of N3.665 billion. The category which began the quarter with a total NAV of N4.099 billion was undermined by a net outflow of N87 million mostly from Stanbic IBTC 30 ETF Fund and Vetiva Industrial ETF.
Umbrella funds posted the best returns among all categories during the quarter, up 1.33%, thanks to Stanbic IBTC Absolute Fund which gained about N131 million (1.73%) and attracted inflow of N2.8 billion with no outflow, leading to a NAV growth of 61.62%
Bond Funds also posted an impressive gain of N197.6 million or 1.02% and attracted additional cash of N3.2 billion but also lost N1.29 billion to investor withdrawals. At the end, the bond fund category’s NAV increased by 12.04% to N19.26 billion from 17.15 billion, the prior quarter.
Money market funds were not left out although it was not analytically possible to estimate the gains/losses as well as the capital activities that took place because they are statutorily required to be reported at par. However, UBA Money market fund, the only one that reports current value/price, gained N17.56 million or 4.54% in Q1. Analysis of the NAV summary shows that money market funds’ NAV increased by 18.72%, growing from N149.39 billion to N177.35 billion. Another category that saw an increase in NAV is the Real Estate Fund category which grew from N45.4 billion to N45.68 billion, thanks to the gain of N320 million (1.04%) posted by UPDC Real Estate Investment Fund.
Flight to Quality
The flow trend, which has persisted for quite some time, indicates that investors are being cautious of their risk exposure as they continue engaging in a “flight to quality” strategy. As indicated above, much of the inflows went to low risk investments like money market funds which garnered 87% of the net inflow while Bond funds and Umbrella funds received 6 and 9 percent respectively. The rest of the fund types got hit by outflows of differing magnitude which in turn saw their NAV being depleted, except for Real Estate Funds, whose outflow effect got cancelled by the impressive profit made by UPDC REIT.
An 11% increase in Asset under management, in a quarter marred by increased volatility/uncertainty amidst falling oil prices, currency devaluation as well as weakening growth potential from the Chinese economy, is quite a mile stone for a financial product like mutual fund which is not yet widely known in Nigeria. Unlike the United States of America, where about 53 million families own investments in mutual funds, Nigeria mutual fund investors are predominantly institutional investors with little awareness and knowledge among retail investors. With increased awareness of the product and time, mutual funds will become a power play in the Nigerian financial system.