Mutual Fund Industry in Nigeria Reaches N1.52 Billion —Report

One year after the publication of its “Comparing Mutual Funds” report, Coronation Asset Management returns to the subject of comparing the performance of Nigerian mutual funds with its latest report entitled “Comparing Mutual Funds II – Apples & Oranges, and a Hand Grenade”. ‘

The report is a survey of the rapidly growing N1.52 trillion mutual fund industry in Nigeria. This year it delves into the differences between the amortized accounting method, used by most Nigerian funds, and the international mark-to-market accounting method, as applied to fixed income funds.

“We find that the amortized accounting method has a fundamental flaw when it comes to dealing with interest rate fluctuations to the extent that we believe it could lead to systemic risk in the future, hence the title of our report this year.

“The mark-to-market method of accounting for fixed income funds is not simply about following the Global Investment Performance Standards (GIPS). Mark-to-market is by far the most secure method of accounting for fixed income securities in a mutual fund, ensuring that fund managers only show investors a unit price (UP) that reflects what that can be achieved in the market,” says Guy Czartoryski. , head of research at Coronation Asset Management.

According to the report, this year, and after a 10.6% decline in total assets under management (AUM) in 2021, the mutual fund industry is experiencing further growth, with total AUM up 8.7%. % in the first five months of the year for N1.52 trillion ($3.64 billion).

He noted that the industry’s compound annual growth rate between 2015 and 2021 was 33%, or 14% per year in inflation-adjusted terms.

Czartoryski concluded that adopting GIPS would allow for a true comparison between fund performance rather than the “apples and oranges” we now have.

“GIPS would open the door to credible fund comparison services such as Morningstar, Yodelar and the Financial Times’ fund comparison service. These advances would pave the way for significant expansion of the industry and the participation of international investors,” he said.

“We believe that Nigerian savers are making the long-term transition from building savings with banks to a culture of saving with mutual funds.

“At just 11% the size of the pension fund industry, we believe the mutual fund industry needs to sustain its momentum with confidence-building measures, first and foremost the adoption of market accounting at market and global investment performance standards. (GIPS),” says Aigbovbioise Aig-Imoukhuede, managing director of Coronation Asset Management.

Dolores W. Simon