Stanbic IBTC and ARM Money Market Funds topped the list of Agusto & Co.’s live ratings of 14 selected money market funds out of the 18 registered by the Securities and Exchange Commission (SEC) on the back of their risk aversion nature.
According to the Lagos-based rating agency, an Aa(F) rating means a minimal to low exposure to downside risk (impairment to the net asset value) in the medium term.
“Money market funds are set to continue to dominate the collective investment schemes market in the short to medium term, accounting for a projected 28percent of total non-pension AuM by 2021 (2018: 25%), with at least three additional MMFs expected to launch in 2019 alone,” the rating agency said
A money market fund is a kind of mutual fund that invests only in highly liquid instruments such as; cash, cash equivalent securities, and high credit rating debt-based securities with a short-term, maturity-less than 13 months. As a result, these funds offer high liquidity with a very low level of risk.
Other money market funds that made the top 10 list of Agusto & Co.’s live ratings included; FBN Money Market Fund (Aa-(F)), Abacus Money Market Fund (A+(F)), AXA Mansard Money Market Fund, (A(F)), United Capital Money Market Fund (A(F)), Chapel Hill Denham Money Market Fund (A(F)), Meristem Money Market Fund (A(F)), EDC Money Market Fund (A-(F)) and Zenith Money Market Fund (A-(F)).
Asset management companies in Nigeria are increasingly offering money market funds (MMFs) as an asset class to reach the country’s risk averse retail market. These funds- which are perceived to be low risk alternatives to other more traditional asset classes, account for over 70percent of collective investment schemes and 25 percent of non- pension assets under management.
An Agusto & Co. fund risk rating assesses exposure to downside (loss of principal) risk based on a portfolio’s investment strategy and guidelines.
“We assess a Fund’s exposure to credit, liquidity, interest rate, currency and pricing risks,” Agusto & Co. said.
As at the week ended 12th July, 2019, the total asset controlled by mutual fund managers was up 20.69 percent, this represented Net Asset Value (NAV) increase by N133.36 billion from N644.56 billion in January 2019 to N777.92 billion in the review month.
Out this, the less risky Money Market Fund accounted for 75.06 percent of the entire asset under management from with a year-to-date appreciation by 19.76 percent from N487.56 billion at the beginning of the year to N583.88 billion in July 2019.
A dive into the data by the industry regulator revealed Stanbic IBTC Money Market Fund, First City Asset Management Plc, Legacy Money Market Fund and GDL Money Market Fund attracted the most funds from investors into the investment option.
Stanbic IBTC Money Market Fund topped the list with NAV of N272.38 billion; this represents 46.65 percent of the total N583.88 billion managed by the asset class.
Legacy Money Market Fund managed by First City Asset Management Plc reported asset of N6.11 billion, this gave the Fund the second seat with a 30.38 percent share of the entire asset controlled in the Money Market Fund asset class.
Furthermore, GDL Money Market Fund with N947.18 million assets under management reported a 4.71 percent share of the market, SEC data analysed by BusinessDay showed.
“Our expectation for money market is supported by the current high-risk environment, which has resulted in many investors being more conservative and seeking risk averse asset classes away from traditional fixed income and equity instruments,” Agusto & Co. projected.
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