As investors continue to reallocate their resources and their continuous withdrawal from money market funds culminate into the weekly dwindling of the total net asset value of mutual funds, the inclusion of the Norrenberger Money Market Fund in the SEC NAV Summary report comes as a boost.
With this inclusion, the money market fund in Nigeria saw an addition of N0.5 billion to its total net asset value.
Since the beginning of the year 2021, the money market category of mutual funds, which evidently is the mainstay of the industry has suffered an estimated outflow or withdrawal of N324 billion with only N120 billion of inflows. That has left the money market category with a reduction of 27.65% in net asset value, from N736 billion it ended 2020 with to N533 billion as of October 8th 2021.
New money market funds
Within the year, however, Core Investment Money Market fund, Emerging Africa Money Market fund, and Norrenberger Money Market Fund were added to the list but negative impacts of the large outflows swallowed up any positive impact that such additions could make. But they boosted the industry, nevertheless.
Not only in Nigeria
That money market funds are seeing huge outflows may not be peculiar to Nigeria. On September 17th, 2021, Reuters reported that the US money market funds were seeing the largest outflows in nine months, according to data from Lipper. According to the said data, US money market funds saw an outflow of $43.34 billion in the week to September 15th 2021, the largest weekly outflow since December 16th 2020.
In the UK, the story is the same but for a different fund category. UK Fixed Income funds suffered the worst outflows since March 2020, after investors withdrew 752 million pounds in September from their fixed income fund investments. This is according to data from Morningstar.
Financial Stability Board to the rescue
Trends in Money Market Funds have also attracted the attention of the Financial Stability Board, “an international body that monitors and makes recommendations about the global financial system.” Recently, on October 11th 2021, to be precise, the Financial Stability Board (FSB) came up with a proposal to boost the resilience of money market funds. The proposal is aimed, among other things, “to curtail the potential for destabilizing redemptions” from money market funds. That underscores the extent, the effect and the anxiety redemptions from money market funds create.
All hopes are not lost
Irrespective of the massive outflows, money market mutual funds still remain the largest category of mutual funds in Nigeria and the fund of choice by many investors. Investors seem to be in love with money market funds because they seem to be much easier to understand. Investors like money market funds too because such investment types come in handy for cash or money management.
The fact that money market funds have low risk, a high degree of liquidity, and are easily used to meet the investment goal of capital preservation endears them to many investors. As long as investors continue to fall in love with money market funds, there is hope that that the trends will reverse as the recovery from the financial implications of the Covid pandemic is achieved and the financial condition and outlook of Nigeria improves after the 2023 elections.