Date Published: 10/11/10

Low Equities' Prices Pave Way For Mutual Fund Managers

In the wake of increased low stocks’ prices after several periods of bearish movement, the quest for collective investment scheme that enables subscribers to enjoy benefits of diversification and professional management of their instrument have continued to lure investors into preference for mutual funds.

A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities (stocks, bonds, short-term money market instruments, other mutual funds, other securities). The mutual fund will have a fund manager that trades (buys and sells) the fund’s investments in accordance with the fund’s investment objective.

Investors in mutual funds stand to benefit from the competitive returns and gain from the disciplined investment approach of the Fund. Investors also stand to minimise their risks as a result of portfolio diversification. Even with the increasing awareness of Funds in the Nigerian investment community, investors appear to be sceptical over investing in mutual funds because of the performance of some Funds over time, except for few of them that have performed impressively.

Though, investors, stock brokers welcome new entrants of Fund into the Nigerian capital market leveraging on the low equities prices, not a few of them believe there is more to be done to get investors appetite for Funds higher. According to Emeka Madubuike, a stockbroker, there is so much locked up in confidence that are supposed to drive the market for mutual funds, especially in a time when investor’s confidence is yet to return fully in the market. “A lot of Funds have not done very well because of past experiences,” he states. “The market is information driven. A Fund needs to have enough information that should drive its performance. It is only when a broker has enough information about a Fund that he can advise an investor,” says Oguntayo Sam of Mission Securities.

Samuel Adeniyi of GTB Asset Management states also that investors are always sceptical about Funds, because “there has been a lot of apathy coming into the market since the crisis”. Nona Awo, an investor, notes: “Since the mutual funds came into the Nigerian market, the level of mutual funds attaining projection has been extremely low”.

Batho Ogbonna of Mega Equities Limited states: “More work needs to be done to provide adequate information about a Fund”.

Courtesy BiznessDay