Some capital market operators on Thursday identified poor investor education as the major challenge affecting mutual funds investment in the Nigerian capital market.
They made the observation in interviews with Daybreak.ng in Lagos, while reacting to the mutual funds trading platform inaugurated by the Nigerian Stock Exchange (NSE).
The operators, who lauded the exchange and the capital market community for the initiative aimed at reactivation trading in collective investment schemes, said, however, that it could only be effective with sustained investor education.
Daybreak.ng reports that mutual fund is a pool of funds brought together by a professional fund manager from some investors to invest in selected underlying securities.
Mr Sola Oni, a chartered stockbroker and Chief Executive Officer, Sofunix Investment and Communications, who commended the exchange for the launch, said that there was need for sustained investor education.
“The exchange has launched the Mutual Funds Platform to reactivate trading in this investment outlet.
“This is highly commendable, but there is need for sustained investor education to attract investors into this sector,” Oni said.
He said that stockbrokers could boost investment income by encouraging investors to participate in mutual funds.
Oni told Daybreak.ng that investment through mutual funds was good for risk adverse investors, saying that it helped investors to diversify risk.
He said that some of the benefits were assets diversification, small capital outlay, opportunity of being managed by an expert and investment of the pool of funds in product varieties.
Oni listed mutual fund downsides to include hidden charges, lack of liquidity, high sales charges and poor execution.
Prof. Sheriffdeen Tella, Professor of Economics, Olabisi Onabanjo University Ago-Iwoye, Ogun, said that the newly-launched platform was good especially for small investors.
Tella said that most of the investors in this category would require massive enlightenment to understand and invest in collective investment outlet.
“There is the need for transparency in the operations of the market, particularly with respect to return on investment which, for now, is not clear to investors,” he said.
Mr Ambrose Omordion, the Chief Operating Officer, InvestData Ltd., described the platform as a welcome development aimed at deepening the market.
“The newly trading platform for mutual fund is a welcome development, as NSE wants to increase tradable products and deepen market,” Omordion told Daybreak.ng.
He noted that the equity market was still weighed down with low patronage when compared with the nation’s population due to lack of investor education.
Omordion said that many people had yet to understand the importance of savings through investment and the dynamics of the stock market.
“The mutual fund product is good to manage risk but the exchange has not done enough education to make the product and platform attractive to the investing public,” he said.
Daybreak.ng reports that NSE, in partnership with some market participants, recently launched Mutual Fund trading and distribution platform.
The participants are the Fund Managers Association of Nigeria, Association of Stockbroking Houses of Nigeria and the Central Securities Clearing System (CSCS) Plc.
The platform will bring together market participants to facilitate electronic transactions with seamless interaction between NSE, CSCS, Fund Managers and Broker Dealers.
