Banu: Improved Regulation, Awareness Growing Mutual Funds Market

Managing Director, STL Asset Management Limited, Ahmed Olaitan Banu spoke to Oluchi Chibuzor on the mutual funds market, role of  STL and benefits investors stand to gain by investing in  the market. Excerpts:

Can you briefly explain what Mutual Funds are and how they work?
Mutual Funds are a type of Collective Investment Scheme, which allows multiple investors to pool their resources towards a common investment goal. This pooled investment is managed by a fund manager who oversees the buying and selling of investment instruments within the Mutual Fund. Additionally, a corporate trustee ensures that the fund manager operates in line with agreed terms and responsibilities whilst the fund is also authorised and regulated by the Securities and Exchange Commission (SEC). The benefits investors receive from a Mutual Fund are proportional to their invested capital. The more you invest, the greater your potential returns, all else being equal.

How has the Mutual Funds market evolved in Nigeria over the years?
The Mutual Funds market in Nigeria has seen significant growth. The total Assets Under Management (AUM) have surpassed N2 trillion, a significant increase from just above N2 trillion before the COVID-19 pandemic. This growth can be attributed to increased awareness and regulatory support from the SEC. Initially, equity Mutual Funds dominated the market, focusing on stocks. Today, Money Market Funds and Dollar Funds have become more prevalent.

Why should investors consider Mutual Funds as part of their investment portfolio?
Investing in Mutual Funds offers several benefits: The first is expertise. Investors leverage the expertise of fund managers to achieve good returns. Second benefit is compliance monitoring. The SEC ensures that Mutual Funds adhere to regulatory standards, providing a layer of security for investors. The third major benefit is diversification: Mutual Funds grant access to a diverse portfolio of securities, reducing investment risk. This makes them particularly appealing to risk-averse investors seeking safety and expert management of their investments.

What factors should investors consider when choosing a Mutual Fund?
Investors should consider the following factors. The number is regulation. They should ensure  the Mutual Fund is registered and authorised by the SEC. They should look out for transparency by checking  for publicly available information and regular updates from the Fund Manager. Also, investors should consider the fund manager’s pedigree by researching  the fund manager’s experience and accessibility. Another importance factor investors should consider is  returns. They should determine if the expected returns (fixed or variable) align with their  investment goals. Similarly, investors should  try and  understand the specific features of the Mutual Fund, such as income distribution frequency, to ensure they meet your needs.

Does STL Asset Management offer any Mutual Funds products. If so, can you tell us about them?
Yes, STL Asset Management offers two Mutual Funds: the STL Money Market Fund and the STL Balanced Fund.  STL Money Market Fund aims to provide investors with high liquidity and capital safety by investing in low-risk Money Market instruments. On the other hand, the STL Balanced Fund seeks to grow investment capital and generate periodic income through a diversified portfolio of stocks and fixed-income instruments.

What are the key features of the STL Mutual Funds?
The STL Money Market Fund offers daily income accrual on invested capital, ensuring that invested funds grow daily. The accrued interests are paid quarterly to investors or reinvested in the Mutual Fund. However, a 20 per cent penalty on accrued interest applies if invested capital is withdrawn within 30 days of the initial investment date. This Mutual Fund is ideal for short-term investments and liquidity management.
On the other hand,  the  STL Balanced Fund provides returns from both fixed-income instruments and stocks, offering diversification benefits. Dividends are paid annually, with the option for reinvestment. A 20% penalty on total returns applies if invested capital is withdrawn within 90 days of the initial investment date. This Mutual Fund is suited for medium- to long-term investments, aligning with the benefits of equities over time.

How do STL Mutual Funds differentiate themselves from other Mutual Funds in the market?
We prioritize safety, returns, and customer service. We ensure the safety of our clients’ investments and strive to deliver positive returns. Our focus on customer service ensures a seamless investment experience, from onboarding to withdrawals. Efficiency is a key aspect, with instant value recognition for investments.

How is STL Asset Management delivering on this promise of efficiency?
We leverage technology to enhance our investment management processes. Our web-based app, 1Click by STL, facilitates seamless client engagements, allowing for easy onboarding, investments, and withdrawals. Our technology ensures smooth operations with minimal human intervention, aligning with our vision for efficiency in the Nigerian Capital market.

Aside from the STL Money Market Fund and STL Balanced Fund, are there any new products or services in the pipeline that investors can look forward to?
Yes, we plan to launch the STL Dollar Fund before the end of the  fourth quarter of 2024. This Mutual Fund aims to provide investors with a secure outlet for USD-denominated investments, offering competitive returns and capital safety within a medium- to long-term horizon.

Finally, what is your vision for the future of STL Mutual Funds, and how do you plan to adapt to the evolving financial landscape?
Our vision is to become the most preferred Mutual Funds provider in Sub-Saharan Africa, known for our returns and reach while meeting investors’ objectives. Innovation, one of our core values, will guide us in navigating the ever-changing macroeconomic and financial environment. We are building our business on the foundation of technology and agility to achieve this vision.