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Volatility in equity market created opportunity in mutual funds – CEO, United Capital

Nigerian News Update » Nigerian Newspapers
Vanguard Newspaper
The company specialises in investment advisory, portfolio and asset management. He highlighted some benefits of Collective Investment Scheme, CIS, and challenges. He said opportunity exists in the sector as its net worth is still less than $500 million. Excerpts:

SOME operators have touted collective investment scheme, CIS, as the solution to low domestic investors’ participation in the Nigerian stock market. Do you share this view?

To a large extent,  yes. The market has been very volatile in the last few years and this has impacted individual domestic investors negatively. However, the volatility in the market did create a lot of opportunities for mutual fund managers as they relied on proper detailed research to make investment decisions, thereby assisting their funds to beat the market.

The awareness of this performance will certainly lead to increased patronage for mutual funds which will ultimately increase domestic participation in the local market.

Most local shareholders do not seem to trust collective investment scheme. As an operator in the market, what do you think is the source of their distrust?

I believe the local shareholders are increasingly appreciating the benefits of collective investment schemes, particularly retail investors who seek diversification and proper fund management. Whilst the industry is still shallow with less than USD 500 million, I see strong growth prospects, as all stakeholders engage the market with the necessary education, performance, transparency and strong corporate governance structures that will stimulate the appetite of the investing public.

Are there things that are being done to change their perception?

Consumer education is very important. We realized low patronage was primarily due to a lack of understanding of Collective Investment Schemes by the general public. Therefore, even if we created awareness, it would not yield the desired outcome to grow the Funds. This has prompted us to take a different approach to consumer engagement, focusing on financial literacy, engaging clients at various touch points with easy to understand content. This strategy has helped to build consumer confidence, trust, and interest.

What will be the role of the operators in changing the negative perception and boosting confidence in the scheme?

The role of operators in changing the negative perception will be to engage the market with the necessary education, performance and transparency as earlier mentioned. Also innovation and the introduction of new product offerings such as the United Capital Eurobond and Wealth for Women Funds that we are about to launch will improve liquidity and depth in the market which will go a long way to boost investor’s confidence in the schemes.

Could you identify some of the benefits an investor stands to derive by embracing the scheme?

The benefits of investing in the scheme include allowing investors to get the maximum advantage of diversification without having to meet any required minimum share purchase. Also they have the benefits of the professional fund manager that leverages on research, risk management and other requisite resources making investment decisions on their behalf.
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