Nigerians’ investment appetite for mutual funds has surged dramatically, as indicated by data from the Securities and Exchange Commission (SEC). Between January and May 2024, the Net Asset Value (NAV) of mutual funds grew by a substantial N662.96 billion.

This represents a remarkable 29.6% increase over five months, rising from N2.26 trillion at the end of December 2023 to N2.9 trillion by the end of May 2024, which could also be partly attributed to the impact of naira devaluation on dollar-denominated funds.

Meanwhile, the growth trend highlights a strategic shift by Nigerian investors seeking to hedge against rising inflation and exchange rate volatility. The inflow into mutual funds is particularly noteworthy as investors look for high-yielding low-risk opportunities, gravitating towards fixed-income and dollar-denominated instruments.

For instance, the recent Treasury bills auction closed at a discounted rate of 20.67%, offering an annual yield of approximately 24% to investors. This attractive yield contrasts with the downturn in the local equities market, which has seen a quarter-to-date loss of 5.03% by the end of May although a year-to-date gain of 32.8%.

The growing preference for mutual funds amid market volatility underscores a broader strategy among Nigerian investors to seek stability and higher returns in a challenging economic environment.

This article analyses the best performing mutual funds across four categories based on yields as of the end of May 2024 based on data from Fund Managers Association of Nigeria (FMAN). The mutual fund categories include, money market fund, dollar mutual fund, fixed income fund, and halal mutual fund.

Noteworthy, is the domination of the likes of Norrenberger, Emerging Africa, and Meristem in the ranking.

Best performing money market funds

Money market funds are mutual funds that invest exclusively in short-term debt securities like treasury bills, bank placements and commercial papers. These funds provide investors with a low-risk option for short-term cash management and capital preservation.

As of 31st May 2024, the average yield on money market funds stood at 17.19%, representing a significant jump compared to 10.2% recorded as of the beginning of the year. Below are the top performers based on yield as of the end of May 2024.

• Emerging Africa MMF – 20.96%
• Coral MMF – 20.21%
• Meristem MMF – 20.18%
• FBN MMF – 20.05%
• Norrenberger MMF – 19.96%

Best performing dollar mutual funds

Dollar mutual funds are collective investment schemes that invest in dollar-denominated financial assets, giving investors exposure to international markets and currency diversification.

These funds provide an opportunity for investors to hedge against currency risk and take advantage of global investment opportunities in foreign currencies. Data shows that the yield declined from 7.7% as of December ending to 5.46% by the end of the review period. Below are the best performing dollar-denominated mutual funds:

• Norrenberger Dollar Fund – 10.07%
• Emerging Africa Eurobond – 9.62%
• Meristem Dollar Income Fund – 9.22%
• CHD Nigeria Dollar Income Fund – 9.08%
• Stanbic IBTC Dollar Fund – 7.43%

Best performing fixed income funds

Fixed income funds are mutual funds that primarily focus on debt securities. They offer investors a diversified portfolio of bonds and other fixed-income instruments, aiming to generate stable income streams while preserving capital.

Average yield on fixed income mutual funds rose to 8.31% by the end of May 2024, almost 200bps higher than the 6.24% recorded as of the beginning of the year.

• Emerging Africa Bond Fund – 19.49%
• Meristem Fixed Income Fund – 16.19%
• Norrenberger Turbo Fund – 13.6%
• Chapel Hill Denham Nigerian Bond Fund – 11.76%
• Cardinal Stone Fixed Income Alpha Fund – 11.75%

Best performing Halal mutual funds

Halal mutual funds are collective investment schemes that follow the principles of Islamic finance by investing solely in Shariah-compliant instruments. These funds provide investors with the chance to align their investments with their ethical and religious beliefs, while pursuing competitive returns in accordance with Islamic principles.

The average yield on halal mutual fund stood at 7.97% as of the end of May 2024.

• FSDH Halal Fund – 12.58%
• Norrenberger Islamic Fund – 11.42%
• United Capital Sukuk Fund – 9.82%
• Codros Hala Fixed Income Fund – 9.69%
• FBN Halal Fund – 5.8%

Why consider mutual funds

Mutual fund investments offer several advantages for individuals. Firstly, they allow investors to diversify their risk across a variety of assets. Additionally, mutual funds are professionally managed, providing investors with expert supervision and advice. Furthermore, they offer flexibility and convenience, catering to different risk tolerances and investment objectives.