Assessing the impact of Risk Levels and fund size on Collective Investment Performance of Selected Fund Managers in Nigeria
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Abstract
Collective investment schemes are vital tools for wealth creation, providing investors access to professional fund management and diversification. This study examined the impact of risk levels and fund size on the performance of selected fund managers in Nigeria from 2014 to 2023. Secondary data from the top 10 collective investment schemes and the Securities and Exchange Commission (SEC) were analyzed using the Difference Generalized Method of Moments (GMM) to address endogeneity, serial correlation, and cross-sectional dependence. Results showed that higher risk levels significantly improved investment performance, with managers who embraced more risk achieving better returns. Fund size also had a positive effect, as larger funds benefited from economies of scale and broader diversification. Additionally, past performance strongly influenced future returns, highlighting persistence in fund managers’ abilities. The study recommends that the SEC and fund management firms develop clearer risk management guidelines to encourage balanced risk-taking. Fund managers should focus on expanding their asset base through marketing and innovation, supported by SEC incentives to improve market liquidity. Enhanced transparency in performance reporting, aligned with global standards, is also advised to facilitate informed investor decisions and improve accountability.
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