RISK-ADJUSTED RETURNS AND PERFORMANCE OF MUTUAL FUNDS IN NIGERIA

This study examines the performance of 30 actively managed equity-based mutual funds in Nigeria using monthly net asset values (NAVs) obtained from the Securities and Exchange Commission and covering a period of about ten years from January 2012 to September 2021. We evaluate the risk-adjusted returns of mutual funds, the extent to which selectivity skills and market timing ability affect risk-adjusted returns, and whether or not the performance of mutual funds persists. The study extends earlier efforts by using more robust multifactor performance appraisal models and investigating the phenomenon of performance persistence within the Nigerian context. Treynor ratio, Sharpe ratio, Jensen’s Alpha, and Fama- French 3-factor multiple regression models are used to assess mutual funds’ risk-adjusted performance, while Treynor-Mazuy (1966) and Henriksson-Merton (1981) multiple regression models are used to evaluate the selective and market timing ability of funds managers. A non-parametric technique based on the Contingency Table is used to test for performance persistence. Evidence shows that mutual funds do not deliver excess risk-adjusted returns, and mutual fund managers do not have selective skills and market timing ability. In addition, mutual funds do not exhibit performance persistence, implying that past performance does not predict future performance. Our result establishes the veracity of the Efficient Market Hypothesis in the Nigerian stock market.