This document examines unit trust/mutual funds as an investment vehicle in the Nigerian stock market. It begins with an abstract that provides background on Nigeria's economy and the growth of its capital markets in the 1990s and 2000s. It then discusses how many individual investors lacked skills and diversification during the global financial crisis, resulting in large losses. The document aims to examine unit trusts as a suitable investment option for small savers and less sophisticated investors. It finds there is a lack of awareness and poor patronage of unit trusts in Nigeria and that more education is needed. The document also notes that unit trusts could help mobilize funds and the economy would benefit from strengthened legal/accounting frameworks around these types of investments.
The Effects of the Global Financial Crisis on the Nigerian Stock Exchangeiosrjce
Financial Crises is a global phenomenon, a situation in which the values of financial institutions or
assets drop rapidly. It applied broadly to a variety of situations in which some financial institutions or assets
suddenly lose a large part of their values. This topic ‘The Effects of Global Financial Crises on the Nigerian
Stock Exchange tend to bring limelight the historical background, theories, causes and effects of financial crises
mostly in the country’s stock exchange. It aims of equipping the Readers, Economics and other Stakeholders in
the economics and financial sector with the right knowledge to face the challenges brought about by this ugly
phenomenon with the view of controlling and reducing its effects to the barest minimum.
Global Financial Crisis and Singapore Vikas Sharma
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Financing the Microfinanciers, How MFIs are sourcing capital -- joint BlueOrc...svmn
Microfinance investment landscape and vehicles. Ann Miles of BlueOrchard Finance, USA and Maya Chorengel of Elevar Equity (Unitus Equity Fund) presented this material jointly in a discussion with Silicon Valley Microfinance Network (SVMN), moderated by Sean Foote -- March 19, 2009.
A commitment to active risk management and a global pursuit of index-linked returns across the asset spectrum underpins an investment philosophy that is the hallmark of the Index Strategy Advisors advantage.
The Effects of the Global Financial Crisis on the Nigerian Stock Exchangeiosrjce
Financial Crises is a global phenomenon, a situation in which the values of financial institutions or
assets drop rapidly. It applied broadly to a variety of situations in which some financial institutions or assets
suddenly lose a large part of their values. This topic ‘The Effects of Global Financial Crises on the Nigerian
Stock Exchange tend to bring limelight the historical background, theories, causes and effects of financial crises
mostly in the country’s stock exchange. It aims of equipping the Readers, Economics and other Stakeholders in
the economics and financial sector with the right knowledge to face the challenges brought about by this ugly
phenomenon with the view of controlling and reducing its effects to the barest minimum.
Global Financial Crisis and Singapore Vikas Sharma
Starting with the genesis and global impact of the Global Financial Crisis (GFC), this paper details drills down into its impact on Singapore's economy, and the measures that were taken by the island-state to limit the damage caused.
Financing the Microfinanciers, How MFIs are sourcing capital -- joint BlueOrc...svmn
Microfinance investment landscape and vehicles. Ann Miles of BlueOrchard Finance, USA and Maya Chorengel of Elevar Equity (Unitus Equity Fund) presented this material jointly in a discussion with Silicon Valley Microfinance Network (SVMN), moderated by Sean Foote -- March 19, 2009.
A commitment to active risk management and a global pursuit of index-linked returns across the asset spectrum underpins an investment philosophy that is the hallmark of the Index Strategy Advisors advantage.
This presentation ppts contains data regarding to the mutual funds with current data as well as the future growth estimations of the mutual fund schemes. Some data is taken from the side share as well. Thank you
Optimal investment strategies for Sovereign Wealth Funds Alexandre Kateb
A presentation with some facts about sovereign wealth funds and some theory supporting the design of optimal strategies of SWFs. I present in detail the example of an oil stabilization fund with a critical discussion of a model outlined by the IMF staff. This should be viewed as a modest introduction to the subject and a work in progress as I will develop this topic more in depth in the coming months.
In-depth Study of Investor's Perception towards investment in Various Alterna...Vinaysingh Tomar
This report is all about the investor's perception towards the investment in various alternative available in the market and also focuses on the factors affecting investor's perception while investing their funds in various alternatives.
External Financing and Economic Growth in Nigeria 1986 2017ijtsrd
External financing has become a veritable resort to remedying the common problems of low productivity, low productivity, low savings and high dependent on consumption from exports in most less developed economies. The use of external finance is believed to have the capacity to close wide gap between domestic savings and investment and provide the complementary funds to facilitate economic activities necessary for growth in Nigeria. This study aimed to investigate the effect of external financing on economic growth in Nigeria between 1986 and 2017. External financing was captured using five variables of external debt stock EDS , foreign direct investment FDI , official development assistance ODA , remittance RMT and foreign portfolio investment FPI , as the independent variables, regressed on economic growth represented by annual growth rate of gross domestic product GDPR as the dependent variable. Data for these variables were obtained from World Development Indicator, and analyzed based on the Autoregressive Distributive Lag ARDL approach. The findings revealed that, in the long run, EDS and FDI had a negative and a positive, significant effects, respectively, while others had no effect on growth in the short run, all the external financing variables EDS, FDI, FPI, ODA, and RMT had no significant effect on economic growth in Nigeria. The study averred that FDI is a veritable source of financing that can bring about economic sustainability to Nigeria. The study recommended, among others, that government should deploy external debts for regenerative projects that will eventually liquidate themselves in the long run. Ekwunife, Ifeanyi Jude | Dr. J. J. E. Ikeora "External Financing and Economic Growth in Nigeria: 1986-2017" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-6 , October 2019, URL: https://www.ijtsrd.com/papers/ijtsrd29388.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/29388/external-financing-and-economic-growth-in-nigeria-1986-2017/ekwunife-ifeanyi-jude
This presentation will give users a general overview of many aspects of the industry and its purpose, including:
• The benefits of hedge fund investing
• Who invests in hedge funds?
• Who regulates the hedge fund industry?
• The various strategies and types of hedge funds
• How do hedge funds generate returns for their investors
Learn more about the global hedge fund industry at: www.hedgefundfundamentals.com.
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In this article we try to study about the importance of performing surveys and they have an added advantage over advertisement. In earlier years manual surveys were done often door to door but off late surveys are being done online all over the world. Most of the nations conduct online surveys and use this as a great strategy to create good products and provide good services to the people and avoid spending heavily on advertisements. Surveys offer many benefits and therefore have become famous for their convenience, comfort and accurate feedback from the consumers. This article is based on the recent trends observed in various sectors where surveys are done and advertisements are offered to the consumer. After doing the marketing research by the companies and the changes in consumer behaviour observed the following conclusion is drawn. Dr. Mamta Bansal | Mr. Mandeep Narang "Performing Online Survey’s “An Added Advantage” Over Advertisement" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-2 , February 2021, URL: https://www.ijtsrd.com/papers/ijtsrd38607.pdf Paper Url: https://www.ijtsrd.com/management/marketing/38607/performing-online-survey’s-“an-added-advantage”-over-advertisement/dr-mamta-bansal
Capital Market and Economic Growth Nexus: Evidence from Nigeriaiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications
This presentation ppts contains data regarding to the mutual funds with current data as well as the future growth estimations of the mutual fund schemes. Some data is taken from the side share as well. Thank you
Optimal investment strategies for Sovereign Wealth Funds Alexandre Kateb
A presentation with some facts about sovereign wealth funds and some theory supporting the design of optimal strategies of SWFs. I present in detail the example of an oil stabilization fund with a critical discussion of a model outlined by the IMF staff. This should be viewed as a modest introduction to the subject and a work in progress as I will develop this topic more in depth in the coming months.
In-depth Study of Investor's Perception towards investment in Various Alterna...Vinaysingh Tomar
This report is all about the investor's perception towards the investment in various alternative available in the market and also focuses on the factors affecting investor's perception while investing their funds in various alternatives.
External Financing and Economic Growth in Nigeria 1986 2017ijtsrd
External financing has become a veritable resort to remedying the common problems of low productivity, low productivity, low savings and high dependent on consumption from exports in most less developed economies. The use of external finance is believed to have the capacity to close wide gap between domestic savings and investment and provide the complementary funds to facilitate economic activities necessary for growth in Nigeria. This study aimed to investigate the effect of external financing on economic growth in Nigeria between 1986 and 2017. External financing was captured using five variables of external debt stock EDS , foreign direct investment FDI , official development assistance ODA , remittance RMT and foreign portfolio investment FPI , as the independent variables, regressed on economic growth represented by annual growth rate of gross domestic product GDPR as the dependent variable. Data for these variables were obtained from World Development Indicator, and analyzed based on the Autoregressive Distributive Lag ARDL approach. The findings revealed that, in the long run, EDS and FDI had a negative and a positive, significant effects, respectively, while others had no effect on growth in the short run, all the external financing variables EDS, FDI, FPI, ODA, and RMT had no significant effect on economic growth in Nigeria. The study averred that FDI is a veritable source of financing that can bring about economic sustainability to Nigeria. The study recommended, among others, that government should deploy external debts for regenerative projects that will eventually liquidate themselves in the long run. Ekwunife, Ifeanyi Jude | Dr. J. J. E. Ikeora "External Financing and Economic Growth in Nigeria: 1986-2017" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-6 , October 2019, URL: https://www.ijtsrd.com/papers/ijtsrd29388.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/29388/external-financing-and-economic-growth-in-nigeria-1986-2017/ekwunife-ifeanyi-jude
This presentation will give users a general overview of many aspects of the industry and its purpose, including:
• The benefits of hedge fund investing
• Who invests in hedge funds?
• Who regulates the hedge fund industry?
• The various strategies and types of hedge funds
• How do hedge funds generate returns for their investors
Learn more about the global hedge fund industry at: www.hedgefundfundamentals.com.
Performing Online Survey’s “An Added Advantage” Over Advertisementijtsrd
In this article we try to study about the importance of performing surveys and they have an added advantage over advertisement. In earlier years manual surveys were done often door to door but off late surveys are being done online all over the world. Most of the nations conduct online surveys and use this as a great strategy to create good products and provide good services to the people and avoid spending heavily on advertisements. Surveys offer many benefits and therefore have become famous for their convenience, comfort and accurate feedback from the consumers. This article is based on the recent trends observed in various sectors where surveys are done and advertisements are offered to the consumer. After doing the marketing research by the companies and the changes in consumer behaviour observed the following conclusion is drawn. Dr. Mamta Bansal | Mr. Mandeep Narang "Performing Online Survey’s “An Added Advantage” Over Advertisement" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-2 , February 2021, URL: https://www.ijtsrd.com/papers/ijtsrd38607.pdf Paper Url: https://www.ijtsrd.com/management/marketing/38607/performing-online-survey’s-“an-added-advantage”-over-advertisement/dr-mamta-bansal
Capital Market and Economic Growth Nexus: Evidence from Nigeriaiosrjce
IOSR Journal of Business and Management (IOSR-JBM) is a double blind peer reviewed International Journal that provides rapid publication (within a month) of articles in all areas of business and managemant and its applications. The journal welcomes publications of high quality papers on theoretical developments and practical applications inbusiness and management. Original research papers, state-of-the-art reviews, and high quality technical notes are invited for publications
Evidence on the Dynamic Relationship between Stock Market All Share Index and...iosrjce
This study examines the dynamic relationship between Stock Market All Share Index and Gross Fixed
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purchaser’s value from 1980 to 2012 were sourced from the statistical bulletin of the Central Bank of Nigeria
and the Nigerian Stock Exchange Fact Book various issues. The ordinary least square (OLS) regression
technique was employed in the data analysis and the error correction mechanism (ECM) was used to study the
short-run dynamics as well as long-run relationship between the stock market and gross fixed capital formation
in Nigeria. The result revealed that all share index of the Nigerian stock market has significant effect on gross
fixed capital formation. It further shows that though the capital market has the potential of influencing gross
fixed capital formation its’ effect has not been fully realized due to illiquidity and low level of development of
the Nigerian capital market. It is recommended that appropriate policy measures been taken to deepen the
market and strengthen the structure of the market to ensure that long term funds are used to finance long-term
investments.
Selected Macroeconomic Factors versus Bond Market Development in Nigeriainventionjournals
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investment in the long run while its short run impact is both positive and significant. This is an indication that
financial intermediation (captured by bank credit to private sector) is a strong driver of domestic investment in
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banking system with more funds and supervisions as well as the encouragement of both foreign and domestic
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An examination of the unit trust scheme mutual fund as a veritable vehicle of investment in the nigerian stock market.
1. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.6, 2013
176
An Examination of the Unit Trust Scheme/Mutual Fund as a
Veritable Vehicle of Investment in the Nigerian Stock Market.
Dr. Robinson Onuora Ugwoke Dr. (Mrs.) Edith Ogoegbunam Onyeanu
Department of Accountancy, Faculty of Business Administration,
University of Nigeria Enugu Campus.
Abstract
The Nigerian economy is characterized by low income, low savings, low investment and low productivity. The
capital market which on its own is a veritable vehicle for mobilizing investible funds from surplus units to units
suffering from scarcity came alive with the financial restructuring of the 1990s and especially the bank
consolidation scheme of 2004. At a time it was adjudged one of the highest yielding stock markets in the world.
However with the global financial meltdown, there was a near complete collapse of the market and many of the
investors who were playing more or less solo got their fingers bunt. As marginal investors, majority of them
lacked the skill, knowledge, competence and capital to effectively diversify their investment risks to have a soft
landing during the meltdown. Neither were they much aware of the availability of the unit trust scheme/ mutual
fund as a veritable investment vehicle especially for novitiates and fringe investors as most of them were. The
result was a poorly patronized segment of the Nigerian stock market and a monumental loss of wealth and
confidence in the market. This paper examines the unit trust scheme /mutual fund as an investment option very
suitable in mobilizing investible funds from small savers and not too sophisticated investors. It finds out that
there is lack of awareness and poor patronage of the scheme in the Nigerian stock market and sufficient wide
spread education is necessary in this regard. It posits that the Nigerian economy stands to gain substantially from
the strengthening of institutional and systemic factors including legal and accounting architecture to enhance
transparency and accountability around fiduciary relationships as unit trust and mutual fund schemes connote.
1 Introduction
Investment is a sin qua non for growth and development of any economic entity. Usually investment involves
postponing current consumption to put resources in capital formation activity or production of future income.
However investment is fraught with risk and uncertainties. There is the risk that the capital may be lost entirely,
or that the return may not be as and at when expected. It is probabilistic irrespective of the vehicle of investment
chosen, to say the least. In most part, the riskier, the higher the expected rate of return. Hence there is always an
attempt to do a trade- off between risk and return, ceteris paribus. Little wonder that Markowitz advocates for a
spreading of investment portfolio to minimize non systematic risks. Portfolio diversification. That is, a portfolio
model that avoids the proverbial putting of all ones eggs in a single basket. Such a sound portfolio selection that
would ensure minimization of risk and maximization of return is better done by financial experts. It is not a
game for all comers.
During the Bank consolidation exercise of 2004 and shortly after, the Nigerian stock market was adjudged one
of the highest yielding stock markets in the world. Investment in the market was so rewarding that it attracted all
manner of investors – risk averse, non-risk averse, financial experts, professionals, civil servants, politicians,
traders, farmers name it. It became an all comers affair. A lot of people made so much money within a short time,
that people were liquidating all other forms of investment (especially real estate) and borrowing from the banks
to play in the Nigerian stock market. Caution was thrown to the winds and majority just kept on investing
without consulting experts in the field. It became the fad. The frenzy was palpably felt in all sectors of the
economy. Investment in all other sectors of the economy was drying up in favor of the stock market. Essentially,
many people, many banks, many firms and even government agencies forayed into the business of investing in
stocks without really patronizing financial wizards and experts. And they were making real money. Caution was
actually thrown to the winds. No special knowledge was felt necessary to ensure success in the business. But
came the global financial meltdown and many fingers became burnt without any hope of ever getting healed..
Following the global financial meltdown, majority of the investors and participants in the Nigerian stock market
went bankrupt. Banks folded, stock brokerage firms liquidated, individuals committed suicide et cetera. It is
feared that the impact was so much due not only to recklessness of the investment activities engaged in but also
to the forms of investment that went on. Not many investors patronized financial experts and not many were
aware and ever tried more sophisticated modes of investment in the stock market such as the unit trust
investment vehicle. Unit Trust Scheme is a non-incorporated collective investment scheme. Its purpose is to
pool the savings of investors with the intention of investing and managing the savings for the investor’s benefit.
2. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.6, 2013
177
The historical average return is about 13% which is higher than a lot of other available investments such as
bonds (Agbasi, 2001).
This paper thus examines the unit trust investment with special focus on its nutty gritty, the importance,
prospects and challenges inherent in investment in unit trust in Nigeria and the extent of awareness and adoption
of unit trust as a vehicle of investment in Nigeria. The paper is organized in four parts. Part one introduces the
work, part two shows the methodology, and part three analysis the findings while part four concludes the work.
2. Methodology
The paper adopted a survey research method that pooled a sample of critical participants in the Nigerian stock
market, to wit, stock brokers, bankers and investors through a random sampling method and administered a
questionnaire on them. Through the statistical method of selecting a sample size for a finite population (for stock
brokers) and another one for an infinite population (for bankers and investors), according to the Yaro Yameni
formulae (Onwumere, 2005) a total of 50 stock brokers, 150 bankers and 180 investors was selected. It used
measures of central tendency and the analysis of variance (ANOVA) to analyze the data collected. In addition
the paper made use of secondary data sourced from the Nigerian Stock Exchange records of unit trust/mutual
funds listed in the exchange as at the date of the research.
3 Findings and Discussion
3.1 Mutual Funds Operations in Nigeria
Mutual funds operations in Nigeria came to the limelight for the first time during the early 1990’s, as a result of
the rapid growth in the financial sector induced by the deregulation policy of the mid 1980s. They emerged as
part of the financial markets innovations that followed the policy of deregulation. Banks engaged in competition
floatation and management of mutual funds then as is happening again presently. A good number of
them closed shop during the financial turmoil that followed. Banks were mainly the fund managers and the
funds went down with the banks that were hit by financial distress. Mutual funds began to re-emerge as from the
mid 1990s but remained relatively insignificant with limited impact in the capital market until the recent banking
consolidation reinforced the sector once again.
3.1.1 Mutual Funds Listed In The Nigerian Stock Exchange.
Presently, there are 21 mutual funds listed in the Nigerian Stock Exchange and another 16 not listed. A growing
number of others are still in the process of being set up. Some of them are listed below;
1) IBTC Nigerian Equity Fund:
This is the biggest mutual fund in Nigeria with a net asset value in excess of N30 billion as at the end of 2007.
The fund, which is managed by IBTC Asset Management Limited, commenced operations in1997. The units of
the fund were issued at an initial price of N1, 000 per unit and the offer price is presently in excess of N11, 000.
The equity fund is mainly capital market based and requires a minimum subscription of N50, 000. The principal
investment is guaranteed for a minimum of three months. The fund has a minimum target allocation of 75
percent in stocks quoted in the Nigerian Stock Exchange and 25 percent in money market instruments. A return
on investment of 62.14 percent was realized in 2007 and annual growth is estimated at an average of 53 percent.
The primary objective of the fund is to achieve long-term capital appreciation by investing in high quality
securities quoted on the Nigerian Stock Exchange and in other instruments approved by SEC. IBTC Asset
Management Limited also manages two other funds – Stanbic IBTC Banks Ethical Fund and Stanbic IBTC
Bank’s Guaranteed Investment Fund.
The ethical fund was floated in 2005 at a par value of N1 per unit. It has a minimum target allocation of 75% in
stocks quoted in the Nigerian stock exchange and a maximum of 25% in money market assets. Its choice of
investments excludes stocks of companies that operate in the brewery and tobacco sectors or involved in the
production of arms and ammunition, gambling or any other businesses considered harmful to society. The funds
focus is to permit a clear moral conscience by investing with the interest of society in mind. It is designed for
those who do not want to make profit at the expense of their religious believes and principles. The minimum
requirement for investing in the fund is N50, 000 and the principal investment is guaranteed against diminution
in value provided the investment is held for a minimum of three months.
The Stanbic IBTC Guaranteed Investment was launched in December 2007 at a nominal value of N100 per unit.
The fund builds its assets around fixed income securities such as government bonds, money market securities
and other securities approved by SEC. It has a minimum target allocation of 75 percent in fixed income
securities and a maximum of 25 percent in securities, essentially blue chip companies listed on the Nigerian
Stock Exchange. Investment in fixed income securities is biased in favor of tax exempt assets and those that
3. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.6, 2013
178
offer the best post tax return. The principal investment is guaranteed against diminution subject to funds kept for
a minimum of three months. The fund is designed to provide regular income and long-term capital appreciation.
2) Arm Discovery
This was established in 1995 and was initially named Equity Growth Fund. The open-ended fund is managed by
Asset and Resources Management Company Limited (ARM). The fund’s investment targets are equities, fixed
income securities and real estate. The investment mix is designed to provide capital growth while achieving an
optimum balance between risk and return. The fund’s investments have allocated targets of a minimum of 40
percent in equities and a maximum of 65 percent. The fund achieved a return of 56 percent in 2007. Minimum
investment amount is N10,000 with minimum additional investment amount of N5,000.
3) Arm Aggressive Growth Fund
This is the second mutual fund managed by ARM and was established in 2004. It has a targeted allocation of 80
percent of its investments in equities quoted in the Nigerian Stock Exchange and 20 percent allocation to money
market and other fixed income investments. The fund is designed for investors with the primary goal of
achieving capital appreciation and having above average appetite for risk for the possibility of higher return in
the long-term. The fund achieved an 86 percent return in 2007 and an annual average of 41.4 percent over the
four years of its operations. Minimum investment in the fund is N50, 000.
4) Coral Growth Fund:
This was set up in 2001 and managed by FSDH (Fist Securities Discount House Limited) Asset Management
Limited (FAML). The fund invests 65 percent of its resources in equities quoted on the Nigerian Stock
Exchange and the balance of 35 percent on investment grade fixed income securities. The minimum investment
amount in the fund is N50, 000 with a minimum additional investment of N10, 000. The investment objective is
to grow capital value over the long term. It is designed to meet the needs of private pension/retirement plan,
savings and investment plans and educational and contingency plans. The fund has recorded an annual average
growth of 33.98 percent by the end of 2006.
5) Coral Income Fund:
This is the second of the three funds managed by FAML. The funds focus mainly on fixed income securities in
both the money and capital markets. As much as 70 percent of its investments constitute fixed income securities
while the remaining 30 percent is targeted at equities quoted on the Nigerian Stock Exchange. The objective of
the fund is to enable investors preserve the value of their capital and achieve a stable stream of income. It is
designed for the less aggressive investors who are desirous of preserving their stock of capital.
6) Coral Ethical Fund:
This is the third mutual fund managed by FAML and focuses on investing in equities quoted in the Nigerian
Stock Exchange but which have been screened to meet specified ethical values. Qualifying equities exclude
companies whose principal business is deriving interest income and those engaged in the production of alcoholic
beverages. Interest bearing securities are also excluded from the fund’s investing focus. The objective of the
fund is to provide investors with capital growth over the long term through investment choices that do not offend
their ethical and social values. This is also called Coral Dynamic fund.
7) Intercontinental Integrity Fund
This emerged as the former A – Z Mutual fund that was managed by Gateway Bank PLC. After the merger of
the bank with intercontinental bank, the fund came under the management of Intercontinental Capital Markets
Limited in 2006. The fund’s investment targets are company stocks quoted on the Nigerian stock exchange,
government bonds, money investments and real estate. Investing in the fund requires a minimum of 10,000 units
at prevailing market price and multiples of 1,000 units thereafter. Investors can realize part or all of their
investments in the fund subject to five working days notice and a minimum investment period of 90 days.
8) Oceanic Vintage Fund:
This was launched in 2007 and is managed by Oceanic Bank International (Nigeria) Plc. The investment targets
of the fund are mainly blue chip equities quoted on the Nigerian Stock Exchange and supported with moderate
interest in real estate and fixed income investments. The fund’s objective is to optimize return for investors from
a portfolio of investments diversified into the main high growth sectors of the economy. The minimum
qualifying investment in the fund is N50, 000.
9) Legacy Fund
This was floated in February 2006 and is managed by CSL Stockbrokers Limited. The fund’s objective is to
achieve regular income for investors as well as capital gains in the long term through a diversified portfolio of
high quality assets. Its investment portfolio is structured to contain a maximum of 50 percent of blue chip
equities quoted on the Nigerian Stock Exchange and the balance mostly of money market assets with moderate
interest in government bonds. At the end of its first one year in operation, its net asset value stood at N1.37
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billion with annualized total return of 55 percent and a growth of 15 percent. Minimum investment in the fund is
10,000.
10) UBA Equity Fund:
This was set up in September 2006 and listed on the Nigerian Stock Exchange Memorandum quotations in
December 2006. The fund’s investment objective is to achieve high return on investment and thus provide a
hedge against inflation. It is managed by UBA Assets Management Limited. Investment allocation targets are 80
percent equities quoted on the Nigerian Stock Exchange and 20 percent money Market Investments. It is ideal
for high return seeking investors with above average appetite for investment risk.
Other funds include;
11) UBA Balanced Fund, Managed by UBA Asset Management Limited and was established in
September 2006.
12) UBA Bond Fund, also managed by UBA Asset Management Limited.
13) Fidelity Nigerian Fund was established in 2002 and managed by Fidelity Bank PLC.
14) Paramount Equity Fund, formerly known as ICON Unit Trust Scheme, is one of the oldest mutual
funds in Nigeria. It commenced operation in April 1991 and changed to its present name in June 2004.
It is managed by Denham Asset Management Limited.
15) Denham Asset Management Limited also manages two other funds not listed on the Nigerian Stock
Exchange. These are the Nigerian Global Investment Fund and Denham Management Millennium
Fund.
16) First Interstate Unit Fund, registered in 1991 as well as continental Unit Trust, Devcom Mutual Fund
and Indo Nigeria Trust Scheme, were all registered in 1991.
17) Frontier Fund was under the management of NAL Bank Plc and First Trustees Nigeria Limited before
the amalgamation that formed Sterling Bank Plc.
A number of new mutual funds are presently in various stages of establishment.
18) Zenith Ethical Fund, Zenith Income Fund and Zenith Equity Funds, all managed by Zenith Capital
Limited. Floated in May 2008.
19) Cash Craft Asset Management Limited floated two mutual funds in 2007 named, Anchor Fund and
Bedrock fund. The fund is not listed in the Nigerian Stock Exchange.
20) Afrinvest (West Africa) Limited, formerly Securities Transaction and Trust Company (Nigeria) Limited
(Sectrust), has floated Afrinvest Equity Fund.
21) DVCF Oil and Gas Limited, a subsidiary of Deep Capital Plc is in the process of establishing DVCF
Oil & Gas Fund. It is offering to the public one billion units of the fund at N1 each. The minimum
subscription is N3,000.
22) Chapel Hill Denham recently launched Nigeria’s first gender specific N2.5 billion mutual fund
(Women’s investment Fund) through an Initial Public Offer (IPO) at N100 per unit.
23) PHB Asset Management, is the fund manager for the Diaspora und launched by Nigerians in Diaspora
Europe (NIDOE) with the support of all NIDO organizations worldwide which should debut in October
2008.
3.2 Extent Of Awareness And Adoption Of Unit Trust As A Vehicle For Investment In Stocks In Nigeria.
Not as much as 20 percent of investors in Nigeria are aware and do invest through the unit trust investment
vehicle. The analysis of variance (ANOVA) test run through the E view computer analysis accepted the
hypothesis that a great majority of investors in the Nigerian stock market are not aware and do not adopt the unit
trust investment vehicle in their investment in the stock market. Majority of the investors in shares entered
through the primary market and by direct purchase of shares as the banks and other companies offered their
shares to the investing public. Not many cared to read and could understand the abridged prospectus advertised
during the offer. Again the critical injunction always demanded of and complied with by the companies offering
their shares to the public, to wit, to advice that prospective investors should consult their Accountant, Lawyer,
Stockbroker or any other financial expert, before filling the purchase forms, was ignored by these prospective
investors. Nearly 80 percent of the pooled investors proved to have never participated in the secondary market,
only bought shares from the primary market, never consulted stockbrokers or accountants and lawyers and
simply bought shares for keeps waiting for dividends either in cash or kind. Little wonder that they never sought
for information about the existence, modus operandi and benefits of the unit trust scheme.
But according to Denham (2008), Unit Trust Scheme is a non-incorporated collective investment scheme; its
purpose is to pool the savings of investors with the intention of investing and managing the savings for the
investor’s benefit. It combines the capital of many investors to employ experienced management in purchasing
securities of many companies. The management of a Unit Trust provides diversification of investments and
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supervision which few investors could individually afford. Professional investment management being full time
job requires specialized knowledge, skill and training. These equip the unit trust manager with the capability and
capacity to compare all industries in the economy, conduct relativity studies of all companies within a promising
industry, evaluate the effect of both monetary and political international events and determine the results of
government policies on each industry.
The unit trust scheme is governed by rules normally articulated in a Deed. The Deed sets out the investment
scope of the fund, names the unit trust management company and the trustees. It provides details of how the unit
trust scheme is to operate including the maximum fee payable, the type of investment that a particular scheme
can make, and how the value of a unit in the scheme can be determined. To facilitate flexibility in unit trust
holdings, the Deed also describes how the price of a unit sold to unit holders and thereafter bought from them
can be calculated. Essentially, the Deed contains a self modification mechanism by outlining the steps that
should be taken when a need arises to make changes to the Deed itself. This forestalls all acrimonious
relationship that could arise between the unit trust holders and the management company and the trustees of the
trust and enhances transparency, accountability and trust.
The Unit Trust Management Company reports to the trustee about the purchase, sale and management of
investments in the Unit Trust Scheme. They also promote and sell units of the scheme of investors (also known
as “Unit Holders”) and buy back units from investors who wish to sell back the units. The management
company keeps record in order to calculate the selling and buying prices and to determine the amount of
distribution payable to the investors. On the other hand, the Unit holders, also called investors, supply the capital
to be invested by the unit trust management company on their behalf. They are responsible for paying a fee to
the management company and the trustee. Unit holders hold units, the value of which is determined by the
formula set out in the deed. It is based on dividing the market value of the net assets of the scheme by the
number of units in circulation. The formula is written thus:
Value of unit = Market value of Net Assets of the Scheme
Number of Units in circulation
Unit holders buy units in the scheme by completing the application form contained in the Unit Trust Scheme
prospectus.
The trustee is responsible to the Unit holders to safeguard their investment and to ensure that the money is
invested according to the term of the deed. They supervise the operations to ensure that the objectives are
followed by the Unit Trust management company. The Trustees also approves and monitors all financial
transactions, hold title documents of all the assets of the Unit Trust Scheme and collect all income there-from on
the investments.
Goodwill is critical to the success of any unit trust management company the same as it applies to any serious
business that has an eye into survival far into the future. In this light, unit trust managers have a reputation for
the stability of their funds that is second to none. Of great importance also is the efficient and effective legal
framework in which the managers operate. Every individual fund has its own independent trustee, although for
administrative simplicity it is not unusual for unit Trust management companies to engage one trustee for all
funds. The trustee’s primary role is to see that the terms of the fund’s deed are adhered to.
The seamless operation of the unit trust fund is also enhanced by the presence of a Regulator, in this case the
Nigerian Securities Commission, and the use of a Prospectus. The Securities Commission Act 1993 provides
that the Securities Commission (SC) is responsible for regulating all matters relating to Unit Trust Schemes. The
SC has drawn up a set of Guidelines on unit trust schemes (Guidelines) to ensure a fair and consistent application
of policies in considering proposals by management companies of unit trust funds. The Guidelines are
formulated with the objective of providing a regulatory frame work that would protect the interests of the
investing public and facilitate an orderly development of the unit trust industry. The requirements of the
Guidelines are to be complied with by all parties involved in a Unit Trust Scheme. In addition, to the above Act
and Guidelines, all Unit Trust Management Companies must comply with the companies (Amendments) Act
1997, the Securities Industry Act 1983 ad Trustee Act 1949.
On the other hand, the prospectus is a document providing information on the Unit Trust Scheme. When a unit
Trust scheme is offered to the public the law requires that a copy of the prospectus be made available to people
interested in investing in the scheme. This allows prospective investors the opportunity to make sound
investment decision. The prospectus must be registered with the Securities Commission. It must contain certain
information required by law. It must be accurate and not misleading. The people involved in preparing it are
accountable for its contents. If there are misrepresentations in the prospectus, legal remedies are available to
investors. By completing and signing the application form from the unit trust scheme prospectus, an investor
becomes a Unit Holder of the scheme and a party to the deed.
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3.3 Prospects Of Using The Unit Trust Scheme As A Veritable Vehicle For Enhancing Mobilization Of Capital
For Investment In The Nigeria Stock Market
From the data collected through questionnaire, both the stockbrokers and the bankers are nearly unanimous on
the potential benefits of using the unit trust scheme as a tool for mobilizing savings and investing in the stock
market. However, the investors themselves show less enthusiasm in the prospects of using the unit trust as a
good mode of investment in the stock market in Nigeria. The result is not unexpected since majority of the
investors are neither aware nor use this mode of investment in the stock market. However for the stockbrokers
and bankers their strong assertion that the unit trust has a lot of prospects is hinged on the possibility of
benefiting from professional management, efficient diversification, easy liquidation of investment, exponential
increase through compounding, regularity of investing and efficient fund administration (Pandey, 2004).
Professional Management is engendered through the gauging of probable effects of extraneous variables and
events on the performance and survival of the firms invested in. As less obvious as these factors might be to non
professionals who invest their savings on the company’s shares, the professional has what it takes to evaluate
them and correctly predict their effect on the profitability of the company both now and in the future. Hence the
investor can hand his savings to a unit trust manager and go to sleep. And the professional can effectively
perform each company’s or industry SWOT (Strengths, Weaknesses, Opportunities and Treats) analysis and
avail the investor the chance to invest wisely. Essentially, the professional has the time to continuously perform
this SWOT analysis more than the investor himself, in appreciation that, in business, change is constant.
Unit trust scheme equally brings about diversification. This means spreading one’s investments among many
securities. It is an important method of reducing risk. It decreases the danger of damages or losses, which can
occur through having all of one’s eggs in one basket. Diversification is difficult and expensive for a small
investor because the cost of purchasing numbers of shares in many companies at the same time is
disproportionately high. Unit Trust with their resources is able to make widely diversified investments available
to even the smallest investor. Diversification involves the ownership of many different securities
There is the prospect of liquidity offered by the unit trust scheme. An investor can sell his units, wholly or
partially, at the following trading day’s unit buying price. Units have a high liquidity that is; they can be readily
converted into cash. It has to be remembered, however, that unit trust’s units will be redeemed at the prevailing
buying price on the following day after receipt of the repurchase form. The unit price may be higher or lower
than the price at which the investor started the plan. Hence an investor can turn in all his savings to a unit trust
scheme with the understanding that the investment is as good as good as cash and can answer for all those
reasons for which some economic units prefer to hold cash. This does not in any case negate the quality of unit
trust scheme as a vehicle for long term investment. It only offers wider range of choice and satisfies both the
short and long time investor.
Unit trust scheme is seen to lead to exponential increase in wealth arising from the opportunity of compound
interest. After all investment income is passive income arising from handing ones savings/fortune to another
expected to be a better agent at growing the wealth. Instead of collecting dividends and searching for a new
investment outlet, the investor that has no immediate need for cash can avail himself of opportunities provide by
many unit trust funds for investors to reinvest their distribution. For those who opted for distribution
reinvestment, the fund will automatically credit the distribution into the account, rather than sending distribution
warrants allow both capital and earning to ‘go back to work’ immediately.
Another prospect is the regularity of investing. Many people do not have substantial sums of cash available to
invest, but they can develop an investment account, investing smaller sum regularly in a unit trust. Most unit
trust funds have plan available to make it possible for smaller investors to invest relatively small amounts
monthly. Hence the scheme is very well suited for civil servants whose salaries are though meager but come
regularly. In Nigeria where the wage level is relatively low, a unit trust plan married to income level of the
worker is ideal means of mobilizing savings for investment. Little wonder that the new pension scheme in
Nigeria is tailored along this scheme.
The presence of a regulatory body is a plus for the unit trust scheme in Nigeria. The Nigerian Securities
Commission established by The Securities Commission Act 1993 provides this regulatory function. The
Securities Commission (SC) is responsible for regulating all matters relating to Unit Trust Schemes. The
Guidelines are formulated with the objective of providing a regulatory frame work that would protect the
interests of the investing public and facilitate an orderly development of the unit trust industry. The requirements
of the Guidelines are to be strictly followed by all parties involved in a Unit Trust Scheme. In addition, to the
above Act and Guidelines, all Unit Trust Management Companies must comply with the companies
(Amendments) Act 1997, the Securities Industry Act 1983 ad Trustee Act 1949. This on a good day provides the
necessary level playing ground for all participants.
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Most importantly, unit trust scheme provide ample chance for experienced administrators of fund to work for
investors for the benefit of meaningful investment in the economy. Not many investors – some politicians,
academics, market women, civil servants, artisans, doctors et cetera – have the experience, time or facility to
properly set up an investment plan, much less supervise it constantly. But unit trust managers provide this
service as professional organizations. They take away the trouble and effort required to obtain quotations on
securities, handle delivery and payment for the securities involved in each transaction, safe-keep cash and
securities and do the necessary accounting and rendition of documents to all stake holders.
According to Adeloye (2009), Unit Trust Schemes create a balance between the expectations of return in a rising
market and possibilities of loses when the market falls. The investment portfolio for a beginner requires being
constructed around a diversified risk advantage and thus guarantees the level of return required to transform
investments into great wealth over the years. The financial capacity needed to achieve the standard portfolio
diversification is clearly not within the reach of the small investors. Recent market developments have also
tended to place new hurdles for the small investor in direct stock market investing. The main restrictive factor is
the general increase in the minimum account opening amounts required by stock broking firm. This has spurred
fresh attempts to establish Unit Trust Schemes to create an alternative investing window for the small investor.
The investing activity requires the involvement of experts in deciding what to buy and when to buy or sell. Unit
Trust Schemes provide a remedy for limited knowledge about stock market investing and inability to select good
investments. They create investing expertise through the appointment of professional managers and make it
available to the general investing public. The fund managers are knowledgeable about the market and are in a
better position than individual investors to build a portfolio of stocks and other securities and turn them over to
take advantage of market developments. Unit Trust Schemes therefore offer a big window of opportunity for
beginners and it is available to both big and small investors. A mutual fund is a financial intermediary that
creates instruments for a group of investors to pool their funds for investment in predetermined markets, usually
equities, bond and money markets.
Finally, the return prospect of mutual funds in Nigeria is enormous. The merit of investing in mutual funds
depends on the ability of fund managers to produce the superior returns they normally claim. Research findings
in Nigeria have not supported the claim that mutual funds can consistently produces superior return that best
market average yield. The ability to consistently produce superior return is tested by comparing annual average
yields of mutual funds over the years with the all share index that represents average performance of a portfolio
not so managed.
A five year annual yield computed by Mr. M. Ibrahim of the research department of SEC between 1993 and
1997 shows a disappointing performance of mutual funds relative to the all-share index. None of the 9 mutual
funds then in operation was able to match the 48.51 percent five year average stock market return. Besides there
was no consistency in the year by year rates of return achieved by the mutual funds during the period.
This was the period when mutual funds operation just began and two factors are identified to have accounted for
the disappointing performance. The first is lack of adequate skills in stock selection and trading. Financial
analysis expertise and market intelligence skills were quite low at that time. The second is the long period of
depression the stock market experienced during the period. The experience is that average portfolio
performances tend to fall below general market average when the stock market faces a decline and tends to rise
above market average in bullish markets.
Table 3.1: First 5 years Annual Yield Rankings (1993 – 1997)
S/NO MUTUAL FUND 5 YEAR AVERAGE ANNUAL
YIELD %
1 ICON Unit Trust Scheme 35
2 Continental Unit Trust 11
3 First Interstate Unit Trust 4
4 Denham Management Millennium Fund 4
5 Gloria Unit Trust Scheme 1
6 Lead Unit Trust 1
7 MBA Mutual Trust Fund (1)
Source: NSE Annual Report 1998.
Unfortunately, with the recent global financial crisis, people have gradually decided to reduce or stop investment
in mutual funds and/or unit trust schemes. Most of them have decided to go into Real Estate investment as an
alternative. Hence unit trust/mutual fund is faced by numerous challenges in Nigeria.
3.4 Challenges To The Use Of Unit Trust/Mutual Fund Scheme As A Veritable Tool For Mobilization Of
Savings For Investment In Nigeria.
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Data provided from the survey show that there are various challenges to the unit trust scheme ranging from
systemic to institutional problems. The various segments of the sample reveal that chief among the institutional
challenges is the weakness of control institutions in the country. The various control institutions – the Police, the
Economic and Financial Crime Commission (EFCC), the Independent Corrupt Practices Commission (ICPC),
the Stock Exchange Commission et cetera are all too weak to fight corruption to a standstill and instill
confidence in investors to freely establish fiduciary relationships as the unit trust scheme demands.
The legal infrastructure and the adjudication system in the country also stand implicated as a major challenge to
the acceptability of the unit trust scheme as a good vehicle for mobilization of savings for investment in Nigeria.
The level of transparency in the dispensation of justice is circumspect. Justice is not only delayed unnecessarily
but is out-rightly denied in many cases. People lose hope in the ability of the courts to protect the weak. And
there is rampant recourse to jungle justice in the settlement of even commercial disputes. There is the general
feeling which is largely correct that financial criminals walk away from the courts smiling home after plea
bargaining abracadabra by lawyers.
Poor accounting and auditing architecture in the country is also identified as a major challenge to the unit trust
scheme. Not many organizations can avail themselves of the services of top grade accountants and auditors. The
unit trust by its nature is not a limited liability concern and the Company and Allied Matters Act of 1990 does
not prescribe a compulsory annual external or statutory audit of its affairs. Given the prevalent poor bookkeeping
and accounting habit in the country and the public’s perception of the failure of audit firms to adequately and
sufficiently forewarn investors of the true state of health of so many companies especially banks that go under
quite unexpectedly, investors generally accept accounting records including audit reports with a pinch of salt.
Low level of awareness about the unit trust scheme by investors poses a major challenge to the scheme. A
greater percentage of the investors do not even have faint idea about the workings of the unit trust scheme. The
populace has very limited information about the scheme and how they can benefit from it as marginal investors.
With proper education in a country of more than 160 million people majority of who are within the working age
and earning very meager salary, the unit trust system could have provided a good opportunity for investment.
Corruption is also implicated as a major minus for the adoption of the unit trust scheme in Nigeria. With the
current rating of Nigeria as a still one of the most corrupt nations in the world by the Transparency International
there is palpable fear in entrusting ones wealth into the care of another person irrespective of the presence of
regulators and trustees.
4 Conclusion
In spite of the numerous benefits of Trust Fund and its very vital prospect as a veritable instrument for pooling
of capital for meaningful investment in Nigeria not many investors within are either aware of this vehicle nor
appreciate its prospects. Whereas the Nigerian stock market has lots of stocks listed numbering more than 500
different stocks, the unit trust/mutual fund segment can only boast of a paltry 21 firms engaged in mutual fund
investment. The Nigerian economy needs much domestic investment to be able to grow at a rate (double digit), it
can develop and enable the country achieve the Millennium Development Goals (MDGs) and probably be in a
position to join the league of the first 20 economies in the world by the year 2020. The income level is low
which gives rise to low saving, low investment and again low production and low income. A constellation of
forces that keep reinforcing each other so much so that the authorities keep embarking on both fiscal and
physical policies to attract Foreign Direct Investment (FDI) to bridge the gap between domestic savings and
required investment level. But the global competition for FDI is so stiff that FDI ends up flowing back to their
sources ultimately. Aremu (2005) posits that Nigeria does not attract up to the African average when the size of
GDP is factored into the calculation of FDI inflow. In the face of low per capita income, the unit trust/mutual
becomes the only viable vehicle for mobilizing small scale savings to be able to invest meaningfully in the real
sector.
It is obvious that the impact of Mutual Funds has not been significantly felt in the Nigerian Economy. Majority
of investors who by and large is still insignificant; viz a viz a population of more than 160 million people are
presently neither aware nor do they patronize the unit trust/mutual fund scheme in Nigeria. However enough
evidence show that even in the present economic down turn, investment through the unit trust is a viable one.
Therefore, there is need for more publicity of Unit Trust Schemes or Mutual Funds so that more people will
become aware and people with small amounts of money may not be discouraged from investing. It is
recommended here that there should be concerted effort to increase public education about unit trust/mutual fund
schemes. There should be a strengthening of the legal framework for transparency and accountability in the
conduct of business in general and the safeguarding of all interests when fiduciary relationships are created in
Nigeria. The accounting architecture should be made more responsive to the expectations and aspirations of
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investors in Nigeria and in this respect the Nigerian Financial Reporting Council should expedite action towards
adaptation and adoption of the International Financial Reporting Standard. Government at all levels should ‘put
their money where their voice is’ with respect to the fight against corruption in Nigeria. The major organs of
control – the ICPC, EFCC, Police, Due process Office.- and the financial regulatory bodies should be
empowered and given the leverage to perform their statutory functions.
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