Evaluating the Impact of Collective Investment Scheme Expenses and Age on Investment Performance of Selected Fund Managers in Nigeria

Abstract

Collective Investment Schemes (CIS) serve as powerful vehicles for wealth creation, offering investors opportunities to benefit from professional fund management and diversification. This study evaluated the impact of CIS expenses and fund age on the performance of selected fund managers registered by the Securities and Exchange Commission (SEC) in Nigeria. The population included all 153 CIS operating in Nigeria as of December 2023. Using a purposive sampling technique, a sample of 45 funds was selected based on criteria that included investment in Nigerian securities and a minimum operational period of three years, ensuring the sample’s relevance and adequacy. A longitudinal research design was adopted, and secondary data were gathered from financial statements and SEC filings covering the period from 2014 to 2023. The Difference Generalized Method of Moments (GMM) regression was applied to account for endogeneity and cross-sectional dependence in the panel data. The findings revealed that both CIS expenses and fund age had a negative and statistically significant impact on performance. High expenses eroded returns, reducing Net Asset Value (NAV), while fund age negatively affected performance, suggesting that older funds may face structural or strategic limitations that curb growth. Based on these results, it is recommended that SEC Nigeria strictly enforce regulatory limits on CIS expenses to promote cost efficiency. To improve performance in older funds, it is suggested that fund managers periodically revise investment strategies to ensure greater adaptability.