Comercio Partners, has advised investors to allocate a significant portion of their portfolio on money market and dollar based mutual funds in order to benefit from the interest rate hike by the Central Bank of Nigeria, CBN, as well as risk of further depreciation of the naira.
Nnamdi Nwizu, Co-Managing Partner/Founder, Comercio Partners, gave this advice in the Comercio Investors’ Education Series report.
The report, among other things, explained the meaning and types of mutual funds.
The report which can be accessed on the firm’s website also differentiates mutual funds from other types of investments such as equity, fixed income and bonds.
“Mutual Funds are “structured”, they are “tailor made” to meet the desire and taste of the pool of investors in the fund. Because they are structured, they can be designed to satisfy various investor needs. Mutual funds can be structured either as Equity, Debt or a Hybrid Fund, ”the company explained.
The major types of, it explained further, are Equity Funds, Debt Funds, Hybrid Funds, Money Market Funds, adding that other types include Income funds, Tax-saving funds, Capital protection fund and Pension funds.
“Mutual funds can also be classified based on risk such as Low risk, medium risk and High-risk funds, Emerging market funds, Global funds, Foreign or International Funds, ”Comercio Partners added.
While noting that mutual funds in Nigeria recorded 11.02 per cent increase in Net Asset Value, NAV to N1.388 trillion Year to Date, year-to-date, June 2022 from N1.250 trillion in the corresponding period of June 2021, Comercio Partners however noted that Money Market mutual funds dominate, accounting for 41.93 percent of the total NAV of the entire market, growing to N582.296 billion as at June 2022 from N477.494 billion in the corresponding period of 2021.
Nwizu explained the dynamics behind the growth in mutual funds and implications for investors, saying: “Investment in Mutual funds will continue to see more traction for the remaining part of the year, while we anticipate investment in Dollar funds given the recent devaluation of the Naira to the dollar both in the official and parallel market.
