The platform is expected to facilitate electronic transactions with seamless connection among key parties in transactions, including the Exchange, Central Securities Clearing System (CSCS), stockbrokers and fund managers.
The NSE said the new platform aims to improve and enhance access of listed mutual funds to investors.
“The overarching goal is to enhance visibility for the listed funds and promote financial inclusion, while stimulating retail investor participation in our market,” the NSE said.
The new platform is also expected to engender listing of more mutual funds at the Exchange.
The Nigerian mutual fund industry is a growing market as fund managers continue to float new funds to provide alternative investment windows for the investing public. Official report by the Securities and Exchange Commission (SEC) showed that there were some 74 registered mutual funds in Nigeria with total net asset value (NAV) of about N552 billion as at April 20, 2018. There are 47 mutual funds listed on the Memorandum Quotation of the NSE.
A mutual fund is a pool of funds brought together by a professional fund manager from several investors to invest in selected underlying securities. The underlying securities can be one or a combination of the following: stocks, fixed income securities, real estate and commodities. A mutual fund portfolio is structured and maintained to match different investment objectives. The type of mutual fund an individual invests in depends on their financial objectives and appetite for risk.
As professionally-managed joint investment vehicles through which investors can pool funds and invest in chosen basket of securities, mutual funds have proven to be a veritable means to optimise returns and reduce risks. With track records of above-average returns and stable performance, mutual funds provide common window for all cadres of investors-high and low networth, to invest in the various segments of the Nigerian economy and earn competitive returns.
Most mutual funds are open-ended investment schemes. This means that the fund manager can create additional units for new investors on demand. The fund manager is also able to provide active liquidity by redeeming units from existing investors who want to sell units for cash. Through this pool of funds, an investor creates wealth over a long period of time by making the money work for him through regular saving and investment.
In addition to liquidity, mutual funds offer a range of benefits to investors, including portfolio diversification and lower transaction costs. The existence of a Trustee and Custodian to a mutual fund ensures the safety of investments, as the Trustee ensures that the fund is managed in line with approved investment guidelines, and the Custodian holds the fund assets.
Mutual fund investments are affordable for low-income investors, as some funds require an initial investment of only N5,000. The mutual fund assets in Nigeria have grown significantly in the last five years. This is an indication of the growing interest in this class of investment.
Data from SEC on the Net Asset Value (NAV) of all registered mutual funds in Nigeria showed that the collective NAV grew by 349 per cent between November 01, 2013 and November 02, 2018. This translated to a Compound Annual Growth Rate (CAGR) of 35 per cent during the period.
However, participation in the Nigerian mutual fund industry has been low, partly due to generally low level of investor education and awareness and particularly, the absence of good understanding and awareness about the mutual fund industry.