One year after our publication ‘Comparing Mutual Funds - Apples & Oranges’, Coronation returns to the subject of comparing the performance of Nigeria’s mutual funds. This year it takes a deep dive into the differences between the amortised accounting method, which most funds in Nigeria use, and the international mark-to-market accounting method, as applied to Fixed Income funds.

We find that the amortised accounting method has a fundamental flaw when it comes to dealing with interest rate fluctuations; so much so that we think it could lead to systemic risk in future. Hence the title of our report this year, ‘Comparing Mutual Funds II – Apples & Oranges, and a Hand Grenade’.

The mark-to-market method of accounting for Fixed Income funds is not simply a matter of following Global Investment Performance Standards (GIPS). Mark-to-market is by far the safest method of accounting for Fixed Income securities in a mutual fund, guaranteeing that fund managers only show a Unit Price (UP) to investors that reflects what can be realised in the market.

Click here to download the full report

Subscribe to Coronation Research