Mutual Funds are professional collective investments managed in the name of various investors from whom money is collected. They have a professionally managed advantage, offering diversification, and play an important role in retirement planning.
Investing in mutual funds makes it easier to invest in various economic sectors with reduced or shared costs. It also makes portfolio management easier. In essence, mutual funds support economic growth by playing a role in financial intermediation.
The popularity of mutual funds throughout the world
According to the Investment Company Institute, there are more than 76,200 mutual funds globally with assets under more than $ 30 trillion in management, representing more than 20% of total global assets under management. Of this number, 90% is controlled by the capital market developed in the West. Unfortunately, not many Nigerians take advantage of the beauty of mutual funds.
Analysis of mutual fund ownership is not as simple as it sounds because there are institutional investors and retail. While retail investors are individuals who buy or sell mutual funds based on their own decision, institutional investors are corporate bodies that buy or sell mutual funds on behalf of investors they collect. These include insurance companies, pension funds, etc.
As far as institutional investors invest in behalf of many investors is considered a unitholder, it may be difficult to have a better amount of number of people investing in mutual funds. Be this, the information available from the Security Commission and Exchange offers an estimate of sneaking into the ownership of mutual funds in Nigeria.
Nigerian mutual fund population
Although the total value of net assets of mutual funds in Nigeria established at N1.35 trillion or $ 3.1 billion, in accordance with the information from the security and exchange commissions, at the end of April 2021, there were a total of 457,256 unitholders in the Nigerian World Mutual Industry Fund. It showed an increase in 4,000 unitholders when compared to 453,256 unitholders in March 2021.
Considering that Nigeria has a population of around 258 million, it implies that only around 0.23% of the population invested in mutual funds. It speaks the volume of the penetration of mutual funds in Nigeria, the potential of growth, and tasks located in front of both asset and government management companies.
When compared to pension fund investors, mutual funds seem to be around 9.3 million Nigerians invested in pension funds. Understandably, the value of pension fund assets far exceeds the number of mutual funds.
Comparison with other countries
Compared to other countries, the penetration of mutual funds among the population in sad Nigeria. According to Statistica.com, 46% of US households have mutual funds while 1.5% of Indians are invested in mutual funds.
What does this mean
The above implication is that there is great potential for growth in the Nigerian mutual fund industry. Therefore, the Supervisory Authority and Asset Management Company must come with the annual target of the expected growth of the mutual fund population in Nigeria.
Getting 2% of Nigerians to invest in mutual funds for the next 5 years is not too brave. They can do this by increasing the campaign on the benefits of investing in mutual funds. The Ministry of Education must add financial literacy or financial management as part of the curriculum in school, even as early as elementary or elementary school levels.