Sell-offs dominate Mutual Fund space as investors lose N40bn in one month

Investors in the Mutual Fund industry lost N40billion on their investment as total Net Value Asset (NAV) dropped to N1.28trillion in June. Bearish sentiments dominated the industry for the third consecutive month as the total Net Asset Value (NAV) suffered a decline of 3.0 percent from N1.32trillion recorded in May to N1.28trillion in June. Mutual fund is an open-end investment scheme which pools funds principally from small investors for subsequent investment in securities and other financial instruments.

The Mutual Fund otherwise known as balanced fund witnessed the largest decline in June as it fell by 7.5 percent month on month (m/m) to N28.45billion as against N30.75 billion recorded in May, data obtained from Cordros securities showed. Trailing in the loss trend is the the Ethical Fund which contracted by 4.72 percent in the period to settle at N11.46 billion compared N12.03 billion in May.

The Fixed-income and Money Market funds also contracted by 3.97 percent and 2.98 percent m/m respectively to N439.77 billion and N486.99 billion. The Bond Fund witnessed the least decline in the month as it fell marginally by 1.55 percent to N250.58 billion. Elsewhere, the Equity-based fund saw an increase in its fund size by 1.48 percent to close the month at N14.92 billion while the Real estate fund rose by 0.09 percent to N49.77 billion for the period under review. Meanwhile, the Bond, Real Estate and Balanced funds saw a marginal increase in their market share to close the month at 19.55 percent (vs 19.05), 3.88 percent (vs 3.73%) and 2.22 percent (vs 2.17%) respectively.

However, the Money Market Mutual Fund still maintained dominance with a market share of 37.99 percent, followed closely by the Fixed Income fund with 34.31 percent. Lastly, the Equity and Ethical based funds had their market shares at 1.16 percent and 0.89 percent, representing the least across classifications. A review of the stock market showed that the equities market sustained the previous month’s bearish performance as the benchmark index lost 1.40 percent m/m to settle at 37,907.28 points. Consequently, investors lost N274.0billion as market capitalization settled at N19.76trillion at the end of June. Activity level worsened as average daily volume and value traded fell 15.69 percent and 35.30 percent to 212.47million units and N2.40billion respectively. Sector performance was generally positive as all indices under our coverage advanced, save the Insurance index which lost 0.30 percent due to sell-offs in AIICO (-13.33%). Analysts said sustained bargain hunting is expected from investors to boost the performance of the market in the months ahead beginning from July.

Meanwhile the money market yields sustained upward trend in the review period as the secondary treasury bills market remained bearish as the average yield rose by 48bps to settle at 6.58 percent at the end of June. The CBN conducted a T-bills auction, offering N187.90billion across the benchmarks. The auction received a total subscription of N1.05trillion while the apex bank allotted N373.45billion across maturities, implying a bid-to-cover ratio of 2.82x. The 364-day bill recorded the highest subscription worth N1.01trillion while offer and allocation were N148.18billion and N350.01billion (bid-to-cover ratio of 2.88x) in that order.

Trailing the 91-day bill saw a total of N26.26billion in subscription with the offer and allocation at N10.15billion and N8.93billion respectively, representing a bid-to-cover ratio of 2.94x. Lastly, the 182-day instrument recorded N19.47 total subscription while the offer and allotment were N29.52billion and N14.51billion in that order, implying a bid-to-cover of 1.34x.

The stop rates at the last auction remained unchanged at 2.00 percent and 3.50 percent for the 91- day and 182-day notes respectively while the stop rate for the 364-day note slightly fell to 9.15 percent from 9.40 percent in the previous auction. The OMO market saw sell-offs as average yields rose by 18bps to close at 9.87 percent at the end of June.

At the primary market, the CBN offered a total of N80.0 billion which was oversubscribed at N207.0billion, representing a bid-tocover ratio of 3.16x. Across tenors, the instrument with the longest maturity saw the highest buying interest, with both subscription and offer standing at N167.73billion and N50.0billion respectively representing a bid-to-cover of 4.19x. Meanwhile the mid-dated instrument saw a subscription of N25.28billion with an offering of N15.0billion representing a bid-to-cover of 1.86x.Lastly the instrument with the shortest maturity received a subscription of N14.0billion compared to an offering of N15.0billion with a bid-to-cover of 1.17x.

The stop rates were maintained at 7.00 percent, 8.50 percent and 10.10 percent respectively across tenors. In July, we expect to see a moderately bullish performance in the money market especially at the long end of the curve as we believe that yields have peaked and investors would attempt to lock in on attractive yields.

The domestic bond market halted its bearish performance as the average yield declined by 66bps m/m to close at 11.48 percent in June. Across tenors, the January 2026 bond recorded the only bearish performance with an increase of 5bps m/m to close at 12.60 percent. Conversely, the March 2036 bond recorded the most bullish sentiment with its yield falling 126bps m/m to settle at 12.80 percent. The DMO conducted a bond auction with N150.00bn across tenors. The offering was oversubscribed at N417.50bn while the total allotment stood at N325.08bn, representing a bid-to-cover of 1.28x.

The MAR 2050 bond had the highest subscription at N223.80bn, with an offer of N50.90bn and allotment of N171.10bn, representing a bid-to-cover of 1.31x. The MAR 2035 instrument saw a total subscription of N127.45bn while offer and allocation stood at N50.00bn and N103.90bn (bid-to-cover: 1.23x) respectively. Conversely, the MAR 2027 bond received the lowest bid at N66.20bn with both offer and allotment at N50.00bn and N50.81bn respectively, representing a bid-to-cover of 1.30x.




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