Funds reporting needs to be harmonised as Nigeria’s mutual funds rose to N1.6tn as of the end of 2020, Coronation Asset Management Limited has said.
The firm disclosed this on Monday in its report on mutual funds titled ‘Comparing mutual funds – Apples and oranges; why harmonised reporting is the next step forward’.
Part of the report read, “The mutual fund industry in Nigeria is growing fast. The total assets of the mutual fund industry in Nigeria grew by 50 per cent in 2020, to N1.6tn.
“Yet this is only 14 per cent of the size of the much larger pension fund industry. So, it needs to keep growing in order to become a financial force.”
While presenting the report during a virtual event on Monday, the Coronation Research team, headed by Guy Czartoryski, said the report examined what happens when an investor seeks comparative information on mutual funds, and takes the example of naira-denominated fixed income funds.
He said the data reported by these funds was very diverse, with different accounting methods used to arrive at very different unit price performance data.
He said this meant that investors lacked the kind of easy comparisons between funds that existed in developed markets, comparisons that could be found on the Morningstar and Financial Times websites.
He said, “In our view, Nigeria’s diverse measures stand in the way of the development of the industry.
“Although it is growing rapidly, we believe that Nigeria’s mutual fund industry requires several more years of growth to reach the N12.3tn total size of Nigeria’s pension funds.”
Harmonisation of its reporting may be a difficult task, making the effort to lead to mutual funds becoming a significant force in Nigeria’s financial infrastructure.
The report said if Nigerian funds must play in the international league, they needed to adopt Global Investment Performance Standards.
While noting that very few Nigerian fund managers applied GIPS at the moment, it stated that mark-to-market accounting was one of the cornerstones of GIPS.
The report said, “Global investors have access to data on thousands of fund across the world and, thanks to adoption of GIPS, the data is comparable and it is free. Anyone can use the Morningstar and Financial Times websites to compare thousands of funds.”
It stated that the first step was to harmonise reporting among Nigeria’s mutual funds.
GIPS, it added, had to be a long-term goal because introducing GIPS was expensive and takes time to enforce.
Harmonising the reporting of Nigeria’s Mutual Funds was a necessary step to creating comparable UP data and helping the industry to achieve its potential, the report said.