Agusto&Co: With Availability of Dollar-based Mutual Funds, Asset Management Funds Will Hit N3.5trn in 2024

Nume Ekeghe

Following Monetary Policy Rate Hikes and increased availability of Dollar-based Mutual funds, asset management funds are slated to grow 10 per cent yearly in the next three years, reaching the N3.5 trillion mark by 2024, Agusto&Co has said.

In its latest report titled, “2022 Asset Management Industry Report,” Agusto&Co said Nigeria remains one of the largest investment management zones in Sub-Saharan Africa adding that the Nigerian Asset Management Industry had grown at a compound annual rate of 20 per cent over the last five years from 2017 to 2021 but however, by 5 per cent in 2021 as a result of the low yield environment.

Asset management funds or product offerings could be classified into three key segments Collective Investment Schemes (CISs), Segregated Portfolios and Alternatives. CISs, also known as mutual funds, are investment vehicles through which clients’ funds are aggregated and managed as a pool. Privately managed funds, which may be discretionary or non-discretionary are referred to as segregated portfolios. In Nigeria, alternatives typically include non-traditional assets and investments such as private equity and infrastructure funds.

The report stated: “The increase in monetary policy rate (MPR), change in the management of some mutual funds, expansion in the alternative investment space, and rising yields are some of the significant trends and developments in the industry in 2021 and half year 2022. In addition, SEC’s new regulations include the increase in registration fees for industry operators, a revision of the annual supervision fees for CISs, guidelines on the issuance of social bonds, custody requirement for segregated portfolios and guidelines on the issuance and custody of digital assets.

“The industry’s earnings have maintained an upward growth trajectory despite an overall decrease in the size of its managed assets and the weak macroeconomic climate. This notable rise in earnings could be attributed to a new fee structure and the increased demand for dollar-based investments, which enhanced income through foreign exchange gains on proprietary assets. We expect to see continuous growth in the earning capacity of industry operators, especially with the continuous inflow of funds from institutional investors such as pension fund administrators, which have a large pool of funds with limited outlets.

“Agusto & Co. anticipates that the industry’s managed assets will grow moderately, by an average of 10 per cent over the next three years, reaching the N3.5 trillion mark by 2024. In our opinion, the growth will be driven by higher yields; increased investments from pension fund administrators (PFAs) and institutional clients as well as increased asset allocation to the international money markets as a hedge against the depreciating local currency. However, the risks to our growth forecast remain the ongoing deterioration of macroeconomic fundamentals, which could significantly lower disposable income and the marginal propensity to save.”

It further noted that CISs continue to account for a significant portion of the industry’s managed assets.

“In particular, as at 31 December 2021, the AuM of CISs stood at N1.4 trillion, accounting for 53 per cent of the industry’s net assets. As at the same date, there were 125 registered CISs in Nigeria, with cumulative assets under management (AuM) of N1.4 trillion.

“Segregated portfolios accounted for a much lower 40 per cent or N1.07 trillion of the Industry’s AuM as of the end of 2021. Alternative assets comprising publicly-listed private equity and infrastructure funds accounted for 7 per cent, N193.4 billion of the Industry’s managed assets as of the same date, ”it added.