WED, 07 SEPT, 2022-theGBJournal| Earlier this year we explained that mutual funds suffered in the first half of the year owing to rising bank deposit rates. However, higher deposit rates have become a tailwind for Money Market funds, using their large pools of funds to benefit from high bank rates coupled with rising fixed income yields. In addition, the correction in the equity market since mid-year provides additional impetus for investors to return to Money Market and Fixed Income funds.
Q2 2022 earnings results failed, by and large, to support the equities market, and investors have thought it wise to reallocate assets back to interest rate products. This is reflected in the growth of the money market and fixed income/bond funds since the end of Q1 2022.
As a result, according to data from the Securities and Exchange Commission (SEC), between 31 March 2022 and 12 August 2022, the total Net Asset Value of all regulated mutual funds grew by 9.83% from N1.32tn (US$3.07bn) to N1.45trn (US$3.37bn).
This gain was primarily driven by the growth in Money Market funds (+5.30%) from N520.14bn to N547.71bn and Fixed Income and Bond funds (+18.06%) from N334.84bn to N395.30bn. These funds make up 65% of all regulated mutual funds’ total Net Asset Value.
Having grown by double digits over the past six and half years – Money Market funds (21.67% CAGR) and Fixed Income/Bond Funds (66.47% CAGR) – our view is that these trends will continue as Money Market funds offer double-digit returns, taking advantage of high bank deposit rates and rising fixed income yields.-Insights by Coronation Research
Twitter-@theGBJournal| Facebook-The Government and Business Journal|email: gbj@govbusinessjournal.ng|govandbusinessj@gmail.com
