Increased awareness, regulations and monetary policy that have impacted the capital market in recent times have been attributed to the increasing participation of retail investors in the market this year.

Average Nigerian investors are diversifying their assets in a more secure option while sustaining improved income stream.

This has led to a significant boost in investments through the Mutual Funds where the value of assets has risen by 11.04 per cent to N1.388 trillion in HI’22, up from N1.250 trillion in the corresponding period of 2021, H1’21.

Investment analysts have attributed the increasing participation of retail investors to increased awareness, regulations and monetary policy that have impacted the capital market in recent times.
Mutual Fund is a professionally managed investment window that pools money from many investors to purchase securities such as stocks, bonds, and short-term debt.

Analysis of the Mutual Funds investment show that the Money Market Funds led other Funds, recording N582.296 billion and accounting for 41.93 per cent of the total value.

It was followed by Bond/Fixed Income Funds recording N407.264 billion, while Dollar Fund occupied the third position on the chart posting N284.299 billion.

Reacting to the improvement in Mutual Funds, analyst and Vice Executive Chairman, HighCap Securities Limited, David Adonri, said: “The growth in NAV (Net Asset Value) of Mutual Funds is impressive but it underperformed the equities market which grew by 21 per cent within H1’22.

‘‘Unfortunately, when annualised, the performance is a negative return when compared to inflation rate. It is around the same range as average yield on bonds which means that the funds were managed conservatively. They may have been weighted more towards debt.”

Mutual Funds outlook
On its viability in the financial sector, he said: “The future of Mutual Funds in comparison with other financial instruments is reasonably bright. They have their captive market which is the retail investment market.
‘‘Additionally, Mutual Funds are plentiful and structured to meet the differentiated needs of investors. Each Fund targets the risk tolerance of its investor group. Their usefulness as portfolio diversification tool is unmatched in the capital market. They deal reasonably well with unsystematic risks and hence reliable tool for risk management. They are generally for passive investors.”
Reacting to this development, analyst and Head of Research and Investment at Fidelity Securities Limited, Victor Chiazor, said: “Investment in mutual funds has over the years continued to increase especially as more investors become aware of the options this asset class provides.
“Going by the fact that mutual funds invest in various asset classes and are managed by professionals, investors are becoming more comfortable around the idea of investing their funds in any mutual fund that meets their investment needs, be it an equity fund, fixed income fund or a balanced fund. The increase in net asset is as a result of the options which have become available to investors.
“Before now, mutual funds were a bit narrow and less understood by the market. As awareness increases we have seen a rise in fund flow towards this asset class and in the medium term we expect this asset class to grow significantly especially given that the asset class is more liquid than other competing investments in the financial markets.”
In his own reaction, an investment banker/chartered stockbroker, Tajudeen Olayinka, said: “11.04 per cent performance by Mutual Funds as at June, 2022 (year to date), was simply a reflection of general performance of securities market in Nigeria as of that date.
“Given that equity market did much better than 11.4 per cent (year to date), as at June, 2022, indicates that collective performance of Mutual Funds in Nigeria was below the performance of the of equity market, but within the average yield in the fixed income space as of that date.
‘‘The performance of Mutual Funds in Nigeria has further corroborated the argument around the market that fund managers tend to concentrate their holdings on fixed income securities, as against equity, perhaps, because of the usual volatility associated with equity market in Nigeria.
‘‘Since 11.04 per cent was above average interest rate paid on savings deposit in Nigeria, it goes to suggest that the expectation of average retail investor must have been met.”
On the future of the Fund, he said: “The future of Mutual Funds in Nigeria is positive, in that more retail investors who desire to enjoy stable portfolio performance, are expected to join the club. It is a positive development for the market.”

Access to technology
The Executive Director, Capital Markets, NGX, Jude Chiemeka speaking recently stated that increased access and the use of technology played a pivotal role in this rise citing the importance of tools like X Mobile transformed the world of investing for all stakeholders involved.
He noted that it was essential to foster a market that provides everyone with the opportunity to participate in the financial market if Nigeria is to fulfil the 95 per cent financial inclusion target by the end of 2024.
“At NGX, we believe that by deepening financial inclusion, we can unlock the true potential of retail investors and ensure they have the tools, knowledge, and support to achieve their financial goals.
“It is important to take a moment to acknowledge the remarkable growth of retail investors in the Nigerian Capital market in recent years.”

Investor’s protection
Market Head, of Market Surveillance and Investigations, NGX RegCo, Mr Abimbola Babalola, assured retail investors of its commitment to ensuring fairness and transparency in the capital market, as it aims to further improve investor confidence and drive financial inclusion in the retail investor ecosystem.
“In other to achieve this, at NGX RegCo, we ensure that all our rules are properly documented with interpretative guidelines issued alongside them. By going through these, everyone participating in the market will understand the rules and how it is being operated.
“Most of what we do in the market is fully automated. For example, the trading engine has an algorithm devoid of human elements. We ensure that every participant observes the rule of the exchange, and we have technology-driven methods of detecting unscrupulous elements trying to take advantage of the market,” he said.

Define investment direction
The Managing Director of CardinalStone Securities Limited, Peter Omoregie, implored retail investors to set clear financial goals when they decide to invest in the capital market.

Last line
“Understand the risks involved and assess your risk tolerance.
“Ask questions like, what do you have available in terms of resources to invest in and what kind of returns do you need to make?” he added.