Mutual Funds in Nigeria record bearish performance in Q1 2021

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Mutual Funds (MFs) offer investors a great way to diversify their holdings instantly. They are investment strategies that allow you to pool your money together with other investors to purchase a collection of stocks, bonds, or other securities that might be difficult to recreate on your own.

Last year, major mutual funds in Nigeria recorded double-figure growth. As of 31st December 2020, the Security and Exchange Commission (SEC) registered a total of 116 mutual funds. According to the SEC data,  54.3% of the registered funds recorded positive growth, 37.1% remained unchanged while only 10 (15.9%) funds recorded negative growth in the period.

However, in the first quarter of 2021 investors had no reason to smile. SEC data revealed that only 25 funds posted positive growth in March against 59 declines while 34 funds remained flat. On average, the 118 listed funds as of 31st March 2021, dropped 1.91%, having recorded a similar decline during February.

Also, the net asset value cutting across several fund types fell 4.01% from N1.57 trillion as of 31st December 2020 to N1.51 trillion as of 1st April 2021 as bears set the tempo on the Nigerian Stock Exchange (NSE) where the benchmark All-Share Index sank 3.63% year to date as of April 1, 2021.

Nigeria Stock Exchange All Share Index
(Nigeria Stock Exchange All Share Index YTD)

The Nigerian Stock Exchange (NSE), which soared by over 50 percent in 2020 and had been named the best-performing stock market among the 93 equity indices being tracked by Bloomberg across the world, plunged in the first three months of 2021 as investor appetite for equities continued to fall amid rising yields.

Despite the fall in total net asset value in the first quarter of this year, Bond funds were up 14.82%, followed by Ethical funds (12.95%) and fixed income funds (12.91%).Meanwhile, real estate funds and infrastructure funds advanced 0.69% and 0.43% respectively. Other funds recorded losses with the money market funds recording the highest loss (-20.68%).

Nigeria is Africa’s largest economy. The country’s GDP advanced 0.11% year-over-year in the last quarter of 2020, following a 3.6% contraction in the previous period, according to the Abuja-based National Bureau of Statistics. It reflected the gradual return of economic activities following the easing of restricted movements and limited local and international commercial activities in the preceding quarters. Growth in agriculture and telecommunications offset a sharp drop in oil production.

Last year, the Nigerian economy shrank 1.9%, the most since at least 1991, compared with a 2.3% expansion in 2019.