IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 5 NO. 2 2020

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Performance of Mutual Funds: Evidence from Nigeria

Sunday Osaretin Igbinosa, PhD

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Abstract

Mutual funds pool funds from investors that they invest in assets on behalf of unit holders to enable investors enjoy the benefits of professionally managed portfolios of investments. Mutual funds are also known as collective investment schemes. In Nigeria, mutual funds’ assets are in excess of over 750 billion naira; and with a dearth of empirical works in this area, the study investigated the performance of mutual funds (MFs) from 31st January to 31st December 2019. Deploying commonly used risk-adjusted performance criteria of Sharpe, Treynor, Jensen and information ratios and the Treynor and Mazuy model, the study computed risk-adjusted performance values using the combinations of monthly net asset values of seven (7) mutual funds types (portfolios), monthly treasury bill rates and monthly allshare index by means of Microsoft Excel worksheet and EViews 9.0 econometric software. The study found that real estate funds, bond funds, money markets funds, fixed income funds and equity funds outperformed the market benchmark index on the Nigerian financial market and that only three fund types (portfolios) - real estate funds, bond funds, and fixed income funds have the capacity to generate persistent returns above market returns to investors; and that managers of bond funds and fixed income funds can exercise superior selectivity skills but with little evidence to suggest that mixed funds could lend themselves to managers’ ability to time the market. The study recommends, among others, that investors in mutual funds whose investment objective is principally profitability can do well by investing in funds that generate consistent above market returns and that professional fund managers particularly new market entrants who desire to quickly make a mark can seek to boost fund performance by establishing fund portfolios that enhance manager’s stock picking capability as well portfolios that could consistently provide above market returns to unit holders.

keywords:

Financial markets, mutual funds, collective investments, fund performance, capital market

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