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Why Money Market funds are attracting large inflows

Money market funds are open-ended mutual funds that invest in short-term debt securities such as treasury bills, certificate of deposits, and commercial paper.
 
They are usually managed by skilled fund managers who are competent to optimize shareholder returns by arranging a balanced mix of portfolio.
 
Currently, there are seventeen fund managers that have active money market funds in Nigeria, compared to nine fund managers in 2016. The Money market funds currently make up 75.25 percent of assets under management (AuM) in the Nigerian mutual fund industry.
 
The rest comprise of equity based funds which is 2.39 percent of the entire market, bond funds (1.73%), fixed income funds (7.39%), real estate funds (7.73%), mixed funds (4.57%), Ethical funds (0.93%), and exchange traded funds which accounts for the remaining percentage of the market, according to Securities and Exchange Commission (SEC) data as at June 8th 2018.
 
On the reasons why money market funds have the highest percentage of the fixed income market, an Alpha Morgan investment Analyst said; “It attracts the highest investors because it is risk free, that is, the return will always be positive and it is short term.
Investors are sure that they will get their return at the end of the day no matter how small it is. Investors in the money market are quite comfortable because they can get their money back when they want it and they get interest, therefore, that is an attraction for them.’’
 
He further added that, “smaller investors can also participate in those funds and enjoy full benefit the fund managers are able to provide for them. That is why more people are more inclined to investing in money market funds as compared to other mutual funds.
 
“Bonds for example, investors have the assurance of securing their returns if they hold till maturity and they can be exposed to capital loss if they do not hold till maturity.”
 
Money market funds as a percentage of total mutual funds had a significant increase from 49.6 percent in December 2016, to 69.25 percent in 2017 and 75.26 percent as at June 2018.
 
“Funds managers will prefer to put investments of unit holders in instruments that have the highest yield and lowest possible risk. Yields were quite high in 2017 at about 18%, thus, fund managers adjusted their portfolio construction to focus more on money market funds,” Johnson Chukwu (MD), Cowry Asset Limited, said.
 
The top three fund managers with the highest net asset value of money market funds are; Stanbic IBTC money market Funds (59.91%), FBN Money market funds (26.60%) and ARM Money market funds (9.83%), as at June 8th 2018.
 
Fund managers with the least Net asset value are PACAM money market funds with 0.04 percent, Kedari Investment fund with 0.06 percent, and Chapel Hill Denham money market fund with 0.09 percent, as compiled from the Security and Exchange Commission (SEC), data.
The post Why Money Market funds are attracting large inflows appeared first on BusinessDay : News you can trust .

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