09-02-2015 by 
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              Investors pour N12 billion into mutual funds in January 2015

 

Fund flow analysis conducted by Quantitative Financial Analytics Company limited indicates that   investors poured an estimated N12 billion into various open-end mutual funds in January 2015. Driven by sustained demand for money market products, expanding appetite for low risk portfolios, and renewed sale of equity strategies, Nigerian mutual fund investors continued the flight to quality that has come to signify the Nigerian market in recent times.

 All fund classes except equity and balanced fund category experienced net inflows of various amounts.  The pattern of the flow indicates a paradigm shift in investor behavior from high risk to low risk assets. Investors are buying money market and real estate assets while selling equity funds. This trend is quite understandable given the continuing decline in the equity market plus the devaluation of the Naira.

 Specifically speaking, N7 billion out of the N12 billion inflow, went to money market funds, while N1.58 billion was poured into the Exchange traded fund category, and N1.4 billion went to Real Estate Investment Trusts (REITS). The greatest fund specific inflow of N3.9 billion was made to Stanbic IBTC money market fund while N2.7 billion went to FBN money market fund.

Money market funds therefore accounted for 60% of the inflows for the month of January 2015 while Equity based funds captured 9% of inflows compared to 13% that went to Real Estate Investment Trusts as well as to Exchange Traded funds. Similarly, bond funds attracted 4% of inflows, while Ethical funds attracted just 1% with barely nothing going to Balanced and Umbrella funds.

With so much cash flow going to money market funds, that asset class now accounts for 37% of the Net Asset Value of Nigerian Mutual Funds as at January 30th, 2015.  This represents an increase of 5% over the December 31st 2014 number of 32%.  Again, with the cash pouring into money market funds, Stanbic IBTC money market fund consolidates its lead as the biggest mutual fund by asset representing 18.1% of Nigerian mutual fund value as at same period. On the other hand, equity fund’s proportionate share of the value of Nigerian mutual funds declined from 19.8% as at December, 31st 2014 to 17.7% (January 30th 2015) as the paradigm shift moves investors appetite away from equity based assets.

If the mood in the market continues unabated, at least in the short run, money market funds may hit capacity sooner than later.

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