The Digital Mutual Fund as Key to Financial Inclusion, National
By Chinwendu Obienyi
A The huge spike in digitization of financial and education services in 2020 emerged following the COVID-19 pandemic which forced all economies (especially Nigeria) in the world to halt major economic activity to control the disease .
The infection has created an opportunity for nations to do business and interact with investors and customers through online technologies. Even the country’s capital market – the Nigerian Exchange Limited (NGX) had to activate a 30-day remote work plan after temporarily shutting down its trading floors.
Today, businesses, customers as well as investors are becoming dependent on advanced database tools and artificial intelligence due to the ease of transactions and holding meetings in convenient locations around the world. through online communication.
This situation has simplified access to financial and capital markets, as the Nigerian investment industry offers a wider range of products, enabling the younger and less affluent segments to invest affordable sums online, via solutions accessible from a mobile phone.
In the past, Nigerians with enough capital to invest would simply open basic deposit accounts that mirrored the performance of high-yielding treasury bills underwritten by the Nigeria Deposit Insurance Corporation (NDIC).
Eighteen years ago, mandatory employer-provided pension fund schemes run by professional pension fund administrators began to attract a greater share of domestic investment when employees began to allocate funds to retirement savings accounts.
Today, the country’s retirement savings sector is worth N13.4 trillion, in an economy with an annual government budget of around N17.3 trillion.
The massive growth of the pension fund sector in recent years shows the volume of savings available in the Nigerian economy. This points to even greater growth potential if more Nigerians had access to a wider range of tools to access the country’s capital markets.
Certainly, the country’s experience with pension funds has developed a much more favorable attitude to investment in general, and to investment funds in particular.
Also today, many more Nigerians, witnessing the growth of their retirement savings, believe it makes sense to allocate additional discretionary cash to mutual funds.
Investment in mutual funds is a pool of funds by investors that can be used to create wealth through the money and capital markets, which can also be used to fund critical infrastructure and expand operations commercial.
With mutual funds now more likely to outperform core deposits, the independent fund industry in Nigeria has grown in the last five years alone. According to the Securities and Exchange Commission (SEC), assets under management in the Nigerian mutual fund industry grew by 50%, representing 1.6 trillion naira in investments in 2020.
Mutual fund data surveys released by the SEC showed that money market funds recorded the highest net asset value (NAV) in absolute terms at 606.258 billion naira since the start of the year (YtD ) in April 2022, compared to N525.532 billion in the corresponding period of 2021. The value represents 43.1% of the total net asset value of the entire YtD market, April 2022.
While still relatively small compared to the pension fund industry, these numbers demonstrate the potential for growth. In such a rapidly growing market faced with such great opportunity, it goes without saying that not all mutual funds are created equal.
As with any investment, investors should be confident that they are working with regulated professionals leveraging world-class research and risk management methodologies to create and operate transparent mutual funds that deliver measurable returns.
Recently, the SEC warned investors to be careful not to patronize unregistered investment crowdfunding and illegal fund manager platforms. Therefore, to this end, it is important to state that there are approximately 127 companies registered with the commission with a mission to change the narrative around mutual funds.
One of the companies, Coronation Asset Management, has recently launched four exciting funds in the market, namely; Coronation Money Market Fund, Coronation Balanced Fund, Coronation Fixed Income Fund and Coronation Fixed Income Dollar Fund.
These existing funds will very soon be supplemented by its new Multi-Asset US Dollar, High Net-Worth Fixed Income and Infrastructure funds. According to the company, these funds are a blend of accessible, easily understood and transparently managed funds and will provide a much younger and less affluent segment of Nigerians with access to Global Investment Performance Standards (GIPS) approved funds.
It is important to point out that getting GIPS approval in Nigeria is no small feat. GIPS approval means funds are managed in accordance with global best practices. This is particularly reassuring for new investors who may not understand the intricacies of investing, but need to be confident that their investments will be professionally and responsibly managed in accordance with global best practice and full client oversight.
One of the great things about the Nigerian capital market today is that the regulator, the SEC, is taking a giant leap in creating the proliferation of mutual funds on the web. The platforms are opening up the country’s capital market to younger, more digitally literate customers.
The proliferation of these platforms and the funds they offer, while not all created in the same way or managed to the same global standards of professionalism or transparency, nevertheless open up the country’s capital markets to a segment more investors than ever.
In the short term, leveraging digital technology and global fund management best practices to make many more funds available for greater investment across a much wider range of industries and sectors will help the effort. of the country in terms of financial inclusion as well as the financing of critical infrastructure in the economy. .
There is, however, much work to be done, and the SEC must work with other stakeholders to ensure that our market is competitive among its peers.