Mutual Funds: Equities based funds fall 8.5% to N29.5bn

THE Equities-based Funds (EBFs), in the Collective Investment Scheme (CIS), has continued a downward trend exacerbated by the political risk associated with the upcoming 2023 general election.

Current data at the Securities and Exchange Commission (SEC) showed that the investment window, which is basically collective investment in equities, fell by 8.5 per cent Year-on-Year (Y/Y) to N29.54 billion in January 2022 from N32.27 billion in the corresponding period in 2021.

The downward movement was a reflection of activities in the equities market   which   fell by 1.23 per cent at the end of January.

The EBFs had fallen by 7.2 percent Y/Y in December 2021 to N28.34 billion from N30.53 billion on December 31, 2020.

It, however, rose 4.2 percent month-on-month (M-o-M) between December 2021 and January 2022.

David Adonri, Vice Chairman, Highcap Securities, had said the lacklustre performance is not surprising because equities performed poorly within the same period.

He said: “As fundamentals of the economy improve, scheme assets will perform better. Any threat to the economy can depress the value of financial assets including CIS. In this respect, the usual political risk associated with the build-up to the general election is a threat. Reduced capital inflow to Nigeria due to U.S Feds rate hike and consequent volatility of local currency are other threats to performance of CIS in 2022 (Equities based Funds inclusive).”

Also providing   insight on the new transaction fees which were non-existent or negligible in the debt capital market at the 2022 first quarter post-CMC briefing, Lamido Yuguda, the SEC DG,said the cost of regulation was relatively the same as in other instruments and markets.

This, he noted, is in addition to the fact that tax advantage gave the market some support, allowing it to grow.

He added, “This support was largely financed by fees from other segments of the capital market. We believe that the debt capital market has grown tremendously and is mature enough to contribute to the cost of regulating the Nigerian capital market, ensuring it remains safe and fair to all participants.

“As such, the Commission introduced a regulatory fee structure on secondary market transactions in debt instruments, which took effect from January 1, 2022.”