FCMB Asset Management Limited has set its sights on supporting the growth of mid-sized companies in critical sectors of the Nigerian economy.
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Initially, we focused on Traditional Investments like Money Market Instruments, Bonds, and Equities. However, we recognised the need to expand into Alternative Assets. These are more complex and cater to professional investors. This shift allows us to address critical challenges faced by both investors and borrowers in Nigeria. For example, Pension Fund Administrators faced negative real returns when their returns were adjusted for inflation.
If interest rates fall, as many expect, with the Central Bank of Nigeria likely to hold rates steady for the rest of the year and possibly cut them next year, locking in a long-term instrument offers more stable returns. Short-term instruments can be volatile – today’s yield might be 20%, but it could drop to 5% tomorrow. Over time, short-term investments may only average around 12.5%.
When you say the Private Debt market is about 15% of GDP, I didn’t know it was that big. What makes up the Private Debt markets in Nigeria? If you are saying Money Market Instruments, remember that such instruments have short maturities of less than one year. For instance, if you issue a Commercial Paper , the maximum tenor will be 270 days. You are still lending to companies via the CP. However, the maturity is less than one year. That is different from a Private Debt Fund, which has a longer maturity profile. It is also a Closed-Ended Fund with maturity of 10 years. This already differentiates it from Money Market Instruments.
Yes, there are lots of Funds. If you look at the U.S. market, you will find that many Fund Managers in the U.S. have Private Credit Funds. We have a list of some of them. A Fund Manager launched the first Private Debt Fund in Angola this year. South Africa already has Private Debt and Credit Funds, and you see similar developments in countries like Egypt and possibly Morocco. So, Private Debt Funds are becoming familiar across Africa.
That’s the typical cycle. You enter a sector, pioneer an activity or introduce an innovation, and then others follow, copy, and replicate. The key is to remain innovative, continually raise the bar, and stay focused on addressing identified challenges in the Market. By doing this, we’ll consistently create value and stay ahead of our peers.
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