Mutual Funds -A Tale of Mixed Fortunes

Friday, January 25, 2019 6:30AM /Proshare Research

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Nigeria’s mutual funds market showed mixed fortunes in 2018 as equity-based funds saw net asset values (NAVs) fall as their money market counterparts fared much better. The marked difference in performance in the separate segments of the mutual market has rational explanation:

• The NAVs of Equity-based funds tumbled on the back of falling equity prices of large Cap stocks in the financial services, building materials and fast moving consumer goods (FMCGs) sectors. 

• The weighted returns of portfolios of equity-tied funds felt the full brunt of economic headwinds that resulted in the rise in domestic interest rates 

• Returns on money market funds grew significantly as rising interest rates and ratcheting bond yields improved NAVs of money market assets 

• Rising interest rates knocked down the prices of bonds, thereby improving the yield of funds invested in fixed income securities such as government Treasuries (T-bills) and government Bonds 

• Weak equity markets cut yields on mixed funds as they presented returns as frail as those of their equity mutual fund cousins. 

• The returns on Real Estate Mutual funds were also flat in 2018. Weak domestic consumer spending and slow economic growth contributed to real estate prices stagnating or falling as supply gradually outstripped effective local demand.

Source: SEC Nigeria

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