Fund Types: A Glossary

A fund that seeks positive returns over time regardless of a traditional market benchmarkA reference index or rate used to evaluate a fund's performance..

Example: The manager combines long and short positions to target a positive annual result.

An absolute returnAn investment's gain or loss without comparison with a benchmark. fund aims to make money over time without measuring success only against a traditional market indexAn index designed to measure a market or market segment.. The word “absolute” describes the objective; it does not guaranteeA contractual promise by another party to meet an obligation if the primary debtor does not. that every month or year will be positive.

For example, a manager may buy investments expected to rise and take short positions in investments expected to fall. If the long positions gain more than the short positions lose, the fund can produce a positive return even when the wider market falls. The opposite outcome is also possible.

These funds may use short sellingSelling a borrowed security with the intention of buying it back later., derivatives or leverageThe use of borrowed money or derivatives to increase exposure relative to invested capital., so their risks can be harder to see than those of a simple long-only fund. Check the target return, time period, permitted techniques, leverage, fees, worst historical losses and access restrictions. Compare the result with cash or another sensible low-risk alternative after fees.

A fund whose manager makes discretionary investmentAn asset or commitment of money made with the expectation of future income, growth, or both. decisions to outperform or meet a stated objective.

Example: The manager changes sector weights after analysing company earnings.

An active fund allows its manager to choose investments and change the portfolioThe complete collection of investments owned by an investor or managed under one mandate. using research and judgment. The aim may be to beat a benchmark, reduce risk, generate income or meet another stated objective.

For example, an active equity manager may buy more bank shares after studying earnings and sell a company whose prospects have weakened. Those decisions can help or hurt the fund compared with simply holding the market index.

Active management usually costs more because it requires research and more trading. Judge a fund against the benchmark and objective stated in its documents, using returns after fees over more than one market condition. Also check whether its process is consistent, how concentrated it is and whether a change of manager has altered the strategy.

The total market valueThe price at which an asset could trade in the market at a given time. of investments managed by a fund or investment manager.

Example: A manager overseeing three funds worth ₦20 billion, ₦15 billion, and ₦5 billion has ₦40 billion in AUM.

Assets under management, or AUM, is the total market value of investments managed by a fund or investment firm. It tells you the size of the pool, not how well it has performed.

If a manager runs funds worth ₦20 billion, ₦15 billion and ₦5 billion, its total AUM is ₦40 billion. AUM can rise because investments gained value or because investors added money. It can fall because investments lost value or investors withdrew money.

Size can help you understand a fund's scale and the fees its manager earns, but bigger is not automatically better. Compare returns after fees, the fund's strategy and its ability to trade the assets it owns. An equity fund can become harder to manage if it is very large compared with the normal trading volumeThe number or value of securities traded during a period. of its shares.

A fund that combines growth assets such as shares with income assets such as bonds and cash.

Example: A balanced fund might invest 40% in listed equities, 50% in fixed incomeInvestments that create contractual or expected interest and principal payments., and 10% in cash.

A balanced fund holds both growth investments, usually shares, and income investments such as bonds and cash. The manager maintains the mix within limits stated in the fund documents.

A fund might hold 40% in shares, 50% in bonds and 10% in cash. The shares provide growth potential, while the bonds and cash may reduce some of the portfolio's short-term swings. Both parts can still lose value, so the mix does not guarantee a positive return.

Balanced funds are useful for investors who want one manager to handle asset allocationThe percentage of a portfolio invested across asset classes such as cash, bonds, shares, and property.. Read the prospectus for the permitted ranges and the latest fact sheet for the actual mix. Two funds called “balanced” may carry very different risks if one holds much more in shares than the other.

A fund that invests mainly in bonds with the aim of earning interest income and possible capital gains.

Example: If market yields fall, existing higher-coupon bonds in the fund may rise in value.

A bond fund pools money to buy a portfolio of bonds. Its return comes from interest paid by the bonds and changes in their market prices.

Bond prices generally move in the opposite direction to market yields. If a fund owns bonds paying 14% and similar new bonds begin paying 19%, buyers will pay less for the older bonds. If market yields fall instead, the older bonds may become more valuable.

A bond fund gives small investors access to a diversified portfolio without buying each bond directly. It still carries interest-rate, credit and liquidity riskThe risk that an asset cannot be sold quickly at a reasonable price or a redemption cannot be met promptly.. Check its durationA measure of a fixed-income portfolio's sensitivity to changes in interest rates., the quality of its issuers, fees and maturityThe date when a debt investment's principal is scheduled to be repaid. profile. In Nigeria, “bond fund” and “fixed income fund” may overlap, so use the portfolio and mandate rather than the name to understand it.

A fund structured to protect some or all invested principalThe original amount of money invested or lent, excluding later returns. at a specified date, subject to its terms and issuer riskThe risk that the entity issuing a security cannot meet its obligations..

Example: A five-year product promises 90% principal protection at maturity.

A capital-protected fund is designed to return a stated portion of the investorA person or organisation that commits capital with the expectation of a financial return.'s starting money at a particular date. The protection depends on the product's structure and applies only under the conditions written in its documents.

A five-year fund might aim to return at least 90% of the original investment at maturity while using the remaining money or investment growth to seek extra return. Selling before the five years end may remove the protection and produce a loss.

Check the protected percentage, maturity dateThe date on which a debt instrument's remaining principal becomes due., fees, early-exit value and who must meet the protected payment. Protection may depend on a bank, bond issuer or derivativeA contract whose value depends on an underlying asset, rate, index, or event. counterparty remaining able to pay. It also does not protect purchasing powerThe quantity of goods and services that a sum of money can buy.: receiving the original amount years later can still mean losing value to inflationA sustained increase in the general price level, reducing the purchasing power of money..

A pooled investment company with a fixed or relatively stable share count that usually trades on an exchange.

Example: Its market price may trade above or below the value of its portfolio.

A closed-end investment company raises a pool of money and usually issues a fixed number of shares. Investors then buy and sell those shares with one another on an exchange instead of redeeming them directly with the fund each day.

The portfolio has a net asset value per share, but the exchange price is set by supply and demand. If NAV is ₦100, the shares might trade at ₦90, a discount, or ₦105, a premium. Selling depends on finding a buyer at the available market price.

Check both NAV and market price, as well as the discount or premium, trading volume, fees, debt and distributionIncome or realised gains paid by a fund to its unitholders. policy. A wide discount is not automatically a bargain; it may reflect poor performance, high costs, illiquid assets or weak demand.

A fund that gains exposure to commodities or commodity-related securities.

Example: A gold fund tracks changes in the price of bullion.

A commodityA standardised physical good such as gold, crude oil, wheat, or cocoa. fund gives investors exposure to raw materials such as gold, oil or agricultural products. It may hold the physical commodity, futures contracts, or shares in companies that produce it; these approaches can produce different returns.

A physically backed gold fund should move broadly with the value of the gold it holds after fees. A gold-mining fund can behave differently because company costs, debt and management also affect its shares. A futures-based fund may gain or lose value when contracts are replaced as they expire.

Before investing, identify exactly how the exposure is created. Check storage or futures costs, currency, fees, tracking differenceThe actual return difference between an index-tracking fund and its benchmark over a period. and liquidityThe ease and speed with which an investment can be converted into cash without a major price concession.. Commodities do not produce interest or dividends by themselves, and their prices can move sharply, so a commodity fund should not be mistaken for a stable savings product.

A fund concentrated in securities from one country.

Example: A Nigeria equity fund invests mainly in companies listed locally.

A country fund concentrates its investments in one country. It gives focused exposure to that country's companies, bonds or other assets, but offers little protection from problems affecting the whole country.

For example, a Nigeria equity fund may mainly own companies listed on the NGX. It can benefit when Nigerian businesses and markets perform well, but elections, regulation, inflation, exchange rates and an economic slowdown can affect many holdings together.

Check whether the fund invests only in locally listed securities or also includes foreign companies that earn money in the country. Review its largest holdings, sector concentrationThe degree to which a portfolio depends on a small number of holdings, sectors, or issuers., currency, fee and trading liquidity. A country fund is usually a focused position, not a complete diversified portfolio.

A licensed institution that safeguards a fund's cash and securities separately from the manager's own assets.

Example: When a fund buys government bonds, the custodian records and holds the assets for the benefit of the fund.

A custodian is the licensed institution that safeguards a fund's cash and securities. The assets are recorded in custody accounts for the fund and kept separate from the fund manager's own assets.

When the manager buys a government bondA debt security issued by a government or government treasury., the custodian handles or records the settlement and keeps the bond under custody for the fund. The manager gives investment instructions, while the custodian controls the movement and safekeeping of the assets under the fund's rules.

This separation reduces the risk of the manager misusing investors' assets, although it does not remove investment or operational riskThe risk of loss from failed processes, people, systems, or external events.. A regulated fund should clearly identify its manager, trustee and custodian in its prospectus, with each institution performing a different role.

A fund investing in countries with developing capital markets and economies.

Example: The portfolio holds shares and bonds from several emerging economies.

An emerging-markets fund invests in countries whose economies and financial markets are developing but are generally larger and more accessible than frontier markets. The exact country list depends on the index or classification the fund follows.

For example, one fund may hold shares and bonds from India, Brazil, South Africa and other emerging economies. Growth can be strong, but returns may also be affected by currency falls, political decisions, weaker investor protections and rapid movement of foreign capital.

Read the fund's country weights rather than relying on the label; one or two large markets may dominate it. Check whether it owns shares, bonds or both, and review currency exposure, fees and liquidity. A country's classification can change, so the benchmark named in the prospectus matters.

A fund that stays close to an index while making limited active adjustments intended to improve return or risk.

Example: The manager slightly overweights profitable companies while controlling tracking errorThe variability of the difference between a fund's return and its benchmark return..

An enhanced index fund stays close to an index but makes small active changes intended to improve return or reduce risk. It sits between a traditional index fund and a fully active fund.

For example, the manager may slightly favour profitable companies and hold slightly less of highly indebted companies while keeping sector and market exposure close to the benchmark. These adjustments can outperform or underperform the index.

Check how far the fund is allowed to depart from the index, which signals guide the changes, its fee and its tracking error. The enhancement must add enough value to cover the extra cost. A short period of outperformance does not show that the method will continue to work in different market conditions.

A fund that invests primarily in shares and seeks long-term capital growth.

Example: An equity fund may hold shares of banks, telecoms, and consumer companies listed on a stock exchangeA marketplace where shares, ETFs, REITs, bonds, and other securities may trade..

An equity fund invests mainly in company shares. Its aim is usually to grow investors' money over the long term, although dividends may also contribute to the return.

A Nigerian equity fund might own shares in banks, telecom companies and consumer businesses listed on the NGX. If those companies rise in value, the fund's unit price can rise; if the market falls, the unit price can fall and investors can lose money.

Equity funds suit money that can remain invested through market declines. Compare a fund's returns after fees with an appropriate benchmark over several market conditions, not only its best year. Also check its largest holdings, sector concentration, fees and whether its strategy matches your time horizonThe expected period before invested money will be needed. and tolerance for loss.

A fund that incorporates environmental, social, and governance factors into investment selection or stewardshipThe responsible oversight of invested assets, including monitoring companies and exercising ownership rights..

Example: An ESG fund may favour companies with stronger emissions management and board oversight.

An ESG fund considers environmental, social and governance information when selecting investments or engaging with companies. Different funds use ESG information in different ways, so the label alone does not describe one fixed strategy.

One fund may exclude companies with high emissions, while another keeps them but favours businesses improving faster than competitors. A third may hold a broad index and use shareholderA person or entity that owns one or more shares in a company. votes to press companies on board oversight or labour practices.

Read the fund's selection method, exclusions, data sources and largest holdings. Check whether ESG factors determine investments or merely supplement normal financial analysis. Also compare fees, performance and risk with a suitable conventional fund. ESG screening can change sector exposure, and a high ESG rating does not mean a company or fund cannot lose money.

A fund that applies moral or values-based inclusion and exclusion rules.

Example: An ethical fund excludes tobacco and weapons producers.

An ethical fund invests according to stated moral or values-based rules. It may avoid certain activities or deliberately support businesses that match the fund's values.

For example, a fund may exclude tobacco, gambling and weapons producers. Another ethical fund may focus on affordable housing or fair labour. Because values differ, two funds carrying the same “ethical” label may include very different companies.

Read the inclusion and exclusion rules rather than assuming they match your own views. Check how exceptions are handled, how often companies are reviewed, the fund's largest holdings, fees and performance. Ethical screening can reduce diversificationSpreading investments across assets, issuers, sectors, or markets to reduce dependence on one exposure. or create sector concentrations, and it does not guarantee that every investor will agree with every holding.

A pooled fund whose units trade on an exchange throughout the trading day.

Example: An investor can place an order for ETF units through a stockbrokerA licensed intermediary that buys and sells exchange-traded securities for clients. in much the same way as an exchange-listed share.

An exchange-traded fund, or ETF, is a fund whose units are bought and sold on a stock exchange. You trade it through a broker during market hours, much like a listed share.

An ETF has a net asset value based on the investments it owns and a market price set by buyers and sellers. The market price can be above or below NAV. For example, an ETF with a NAV of ₦100 may trade at ₦102 when buyers are willing to pay a premium.

Before trading, check what the ETF holds, its fee, NAV, market price, bid-offer spreadThe difference between the price at which units can be sold and the price at which they can be bought. and normal trading volume. A limit orderAn instruction to trade only at a specified price or better. can help control the price you pay in a thin market, although it may not execute. Many ETFs track indexes, but an ETF does not have to be passive or index-based.

An unsecured debt instrument whose return tracks an index or strategy, subject to issuer credit riskThe possibility that a borrower or issuer will fail to make promised payments or suffer a downgrade..

Example: An ETN tracks a commodity indexA rules-based measure tracking a basket of commodity prices or futures contracts. but remains a debt obligation of the issuing bank.

An exchange-traded note, or ETN, is debt issued by a bank or other financial institution. Its repayment is linked to an index or strategy, and the note trades on an exchange, but it is not a fund that owns the index's underlying assets.

For example, a commodity ETN may promise the return of a commodity index after fees. If the index rises, the note's value should rise according to its formula. Investors still depend on the issuing bank to make the payment.

An ETN carries both market riskThe possibility of loss because broad market prices or rates move against an investment. from the tracked index and credit risk from the issuer. Check the issuer's strength, maturity date, fee, tracking formula, early-redemption terms, trading volume and market price. Do not confuse it with an ETF, which normally holds assets in a separate portfolio.

A fund that invests substantially all of its assets in a larger master fund.

Example: A local feeder fund gives investors access to a global portfolio managed offshore.

A feeder fund collects money from investors and places most or all of it in another fund called the master fund. The master fund makes the actual investments.

For example, a naira feeder fund may accept subscriptions from Nigerian investors and invest the money in an offshore global equity master fund. The feeder provides local access, while the master fund owns the shares and determines most of the investment return.

Review both layers before investing. The feeder may add its own fees, currency conversion, tax rules and redemptionThe process of selling fund units back to the fund in exchange for cash. timetable to those of the master fund. A problem or withdrawal restriction at the master-fund level can also affect investors in the feeder.

A fund focused on income-producing debt securities such as government and corporate bonds.

Example: A fixed income fund may combine government bonds, state bonds, and high-quality corporate debt.

A fixed income fund invests mainly in debt instruments such as government bonds, corporate bonds and treasury securities. It earns interest, but its unit price can also rise or fall as market interest rates and borrowers' credit quality change.

Suppose a fund owns bonds paying 14%. If similar new bonds begin offering 19%, the older bonds become less attractive and their market prices may fall. The fund can therefore record a loss for a period even when every borrower continues to pay.

Do not treat “fixed income” as “fixed value.” Check the fund's duration to understand its sensitivity to interest rates, and check how much it holds in government, bank and corporate debt to understand credit risk. Match the fund's likely price movement and redemption terms to when you expect to need the money.

A fund investing in smaller or less-developed capital markets than typical emerging markets.

Example: A frontier-markets fund accepts lower liquidity in exchange for access to early-stage markets.

A frontier-markets fund invests in smaller, less liquid markets that are not usually included in the main developed- or emerging-market groups. The classification is set by index providers and can change over time.

A frontier fund might hold companies from several African, Asian or Eastern European exchanges. These markets can offer access to businesses at an earlier stage of market development, but buying and selling may be difficult and reliable information may be limited.

Check the countries and exchanges actually represented, because a few markets or companies can dominate the fund. Important risks include low trading volume, wide bid-offer spreads, currency controls, political change, custody arrangements and restrictions on foreign investors. Potential growth does not compensate automatically for these risks.

The licensed firm responsible for investment decisions and day-to-day management of a fund.

Example: The manager decides how much of a balanced fund goes into equities, bonds, and cash within the fund mandate.

A fund manager is the licensed firm that decides how a fund's money is invested. It chooses what to buy or sell, but it must stay within the limits written in the fund's prospectus and trust deedThe legal document establishing a trust-based fund and defining the powers and duties of its parties..

For example, the manager of a balanced fund may decide how much to hold in shares, bonds and cash. It cannot simply turn the fund into a completely different product if the fund documents do not allow that change.

The manager does not own the fund's assets. A custodian safeguards them and a trustee oversees the manager on behalf of investors. Judge the particular fund by its long-term returns after fees, consistency, disclosureThe provision of material information needed for informed decisions. and service quality; another fund run by the same firm may have a different team, strategy and result.

A fund that invests mainly in other funds rather than directly in individual securities.

Example: A diversified fund of funds allocates money across equity, bond, and propertyLand and buildings held for use, rent, development, or capital appreciation. funds.

A fund of funds invests in other funds instead of buying most securities directly. One purchase can therefore give an investor access to several managers, strategies or asset classes.

For example, a fund of funds might place 50% in an equity fund, 30% in a bond fund and 20% in a property fund. The value of the fund of funds changes as those underlying funds gain or lose value.

This structure can make diversification and portfolio management easier, but it can also create two layers of cost: the fund of funds' own fee and the fees charged by the underlying funds. Check the total cost, whether any holdings overlap, how often the allocation changes and whether the underlying funds can be redeemed when needed.

A fund permitted to invest across many countries, including its home market.

Example: A global equity fund owns companies in Africa, Europe, Asia, and North America.

A global fund can invest in many countries, including the country where the fund is based. It may focus on shares, bonds or several asset classes.

For example, a global equity fund might own companies in Nigeria, the United States, Europe and Asia. Results will depend on the investments themselves and on exchange-rate movements when the portfolio uses currencies different from the investor's own currency.

“Global” does not automatically mean evenly diversified. A market-weighted fund may still hold most of its money in the United States or in a few large companies. Check the country and currency allocations, largest holdings, fee and whether the fund hedges currency exposure. An international fund usually excludes its home market; a global fund may include it.

A fund whose stated payment or capital protection is backed by a guarantor, subject to contractual conditions.

Example: A bank guarantees the fund's principal at the end of the term.

A guaranteed fund has a stated payment backed by a named guarantor, such as a bank or insurer. The guarantee is a contract, not a promise that the fund's investments cannot fall.

For example, a bank may guarantee repayment of the investor's original capital at the end of five years. If the portfolio is worth less at that date, the guarantee requires the bank to cover the stated shortfall, provided all contractual conditions have been met.

Identify the guarantor and exactly what is guaranteed: principal, a percentage of principal, income, or a maturity value. Check the maturity date, fees, early-withdrawal rules and exclusions. The guarantee is only as reliable as the guarantor's ability and legal obligation to pay, and it may not apply when an investor exits early.

A privately offered pooled fund that may use leverage, short selling, derivatives, and flexible strategies.

Example: A hedge fund profits from both rising and falling securities through long-short positions.

A hedge fund is a privately offered investment pool that can use a wider range of strategies than a typical public mutual fund. Depending on its mandate, it may use short selling, leverage, derivatives or concentrated positions.

A long-short hedge fund might buy shares it expects to rise and short shares it expects to fall. That can reduce some market exposure, but losses can still be large if either side of the trade moves against the manager. The word “hedge” does not mean the whole fund is protected.

Access is often limited to eligible or professional investors, and withdrawals may be allowed only at set times. Review the strategy, leverage, valuation method, fees, lock-up period, withdrawal limits and independent oversight. Regulation and legal structure differ by country, so verify the operator and offering rather than relying on the label.

A fund designed primarily to generate regular income from interest, dividends, or rent.

Example: A retiree invests in an income fund that pays quarterly distributions.

An income fund is managed mainly to produce cash income from investments such as bonds, dividend-paying shares or property. It may pay that income to investors or offer a class that keeps it invested.

For example, a retiree may choose a fund that makes quarterly distributions from bond interest and share dividends. The amount can change from one period to the next, and part of a payment may sometimes come from realised gains or capital rather than recurring income.

A distribution target is not a guarantee. Check what the fund owns, where its payments come from, how often it distributes, and whether the unit price has been falling while cash is paid out. Compare total returnThe complete investment result from price changes plus income, assuming distributions are included. after fees, not the distribution rate alone, and confirm the redemption timetable.

A fund designed to track the holdings and performance of a stated market index.

Example: An index fund seeks to hold shares in proportions that broadly follow a broad market index.

An index fund is built to follow a stated market index instead of relying on a manager to choose which securities will win. It normally holds all or a representative sample of the index's securities in similar weights.

If a company represents 15% of the NGX 30 index, a fund tracking that index may place roughly 15% of its portfolio in that company. When the index changes its members or weights, the fund adjusts its holdings.

An index fund's return will usually differ slightly from the index because of fees, trading costs, cash holdings and tracking decisions. Compare its fee and tracking difference. “Index fund” describes the investment strategy; “ETF” describes a fund whose units trade on an exchange. An index fund can be an ETF or another fund structure.

A fund designed to reproduce the return of a specified index before fees and implementation differences.

Example: The portfolio holds benchmark securities in matching or representative weights.

An index-tracking fund aims to reproduce the performance of a named index before fees and trading differences. It follows the index's rules instead of asking a manager to choose securities based on personal forecasts.

The fund may buy every securityA tradable financial claim or ownership interest, such as a share, bond, or fund unit. in the benchmark at similar weights or use a representative sample. A fund tracking an index of 50 companies, for example, might hold all 50 or enough of them to behave like the index.

The fund will not match the index perfectly. Fees, cash, taxes, trading costs and samplingTracking an index with a representative subset of constituents. create a tracking difference. Check the exact index, replication method, fee and historical tracking difference. “Index-tracking fund” and “index fund” usually describe the same basic strategy; either can be structured as an ETF or an open-ended fundA fund that can create or cancel units as investors subscribe and redeem..

A fund investing in assets such as roads, power, ports, telecommunications, or utilities.

Example: An infrastructure fund finances a toll road and earns long-term concessionA contractual right to build, operate, or collect revenue from an asset or service for a stated period. income.

An infrastructure fund invests in assets or projects that provide essential services, such as roads, power plants, ports, telecommunications and water systems. It may own projects directly, lend to them or invest in the companies that operate them.

For example, a fund may finance a toll road and receive a share of toll revenue during a long concession. The project can generate steady income once operating, but construction delays, cost overruns or lower-than-expected traffic can reduce the return.

Infrastructure investments often last many years and may be difficult to sell quickly. Check whether the fund owns completed assets or projects still being built, how much debt is used, the concession or contract terms, government involvement, currency exposure, fees and withdrawal restrictions.

A fund that invests outside the investor's or fund's home market.

Example: A Nigerian investor uses an international fund to gain foreign-market exposure.

An international fund invests outside its home country. From a Nigerian investor's point of view, it can provide access to foreign companies, bonds or markets that are not available locally.

For example, a fund based in Nigeria might invest in shares listed in the United States, Europe and Asia while excluding Nigerian shares. If those shares rise, the fund may gain, but changes in exchange rates can increase or reduce the return measured in naira.

Check what “international” means in the fund's documents because the label depends on the fund's home market. Review its country and currency exposure, taxes, fees and access to your money. Unlike an international fund, a global fund may invest both at home and abroad.

A fund that offers to repurchase a limited percentage of its shares at scheduled intervals rather than daily.

Example: Investors may redeem only during quarterly repurchase windows.

An interval fund does not normally let investors redeem whenever they choose. Instead, it offers to repurchase a limited amount of its shares at scheduled times, such as every three months.

Suppose a fund offers to buy back up to 5% of its shares each quarter. An investor can request a redemption during that window, but if total requests exceed the limit, each request may be reduced. The remaining shares must wait for a later offer.

Because withdrawals are limited, interval funds can hold investments that are difficult to sell quickly, such as private creditNon-bank lending to privately held companies or assets. or property. Check the repurchase schedule, percentage offered, pricing method, notice deadline, fees and what happens when requests are prorated. Do not use one for money you may need on short notice.

A central fund that receives assets from one or more feeder funds and invests them as a single portfolio.

Example: Several feeder funds pool their money in one master fund.

A master fund is the central portfolio in a master-feeder arrangement. One or more feeder funds send investors' money to it, and the master fund invests the combined pool.

Suppose three feeder funds serve investors in different countries or currencies. Instead of maintaining three separate portfolios, they invest in one master fund that buys and sells the securities. Each feeder's value reflects its share of that central portfolio, adjusted for its own costs and terms.

Most investors deal with a feeder rather than subscribing directly to the master fund. To understand their exposure, they should read what the master owns, who manages it, its fees and liquidity, as well as the extra fees and rules at the feeder level.

A mutual fund that invests mainly in short-term, relatively liquid instruments such as treasury bills and deposits.

Example: A money market fund may hold Treasury bills, commercial paperShort-term unsecured debt issued by a company., and bank placements to generate income.

A money market fund pools investors' money and places it in short-term investments such as treasury bills, bank deposits and commercial paper. Its main goals are to preserve capital, earn income and make withdrawals reasonably easy.

For example, instead of placing ₦100,000 in one treasury billA short-term government debt instrument usually issued at a discount and repaid at face value., you can buy units in a fund that holds many short-term instruments. Income earned by the portfolio increases the value of your holding. The quoted yield is annualised, can change with market rates and is not guaranteed.

Money market funds usually fluctuate less than bond or equity funds, but they are not risk-free. Bank and corporate instruments carry credit risk, and inflation can reduce the purchasing power of your return. Check the portfolio mix, fees, current yieldAnnual coupon income divided by the bond's current market price., minimum holdingThe smallest balance an investor must retain in a fund account. rules and normal redemption time.

A fund that invests across several asset classes within one portfolio.

Example: A multi-asset fund combines shares, bonds, property, commodities, and cash.

A multi-asset fund combines several types of investment in one portfolio, such as shares, bonds, property, commodities and cash. The manager decides how much to place in each asset classA group of investments with similar economic characteristics and market behaviour. within the fund's rules.

For example, a fund might hold 45% in shares, 35% in bonds, 10% in property and commodities, and 10% in cash. When shares fall, the other assets may reduce the overall decline, although diversification cannot prevent every loss.

Check the current allocation and the permitted ranges, because two multi-asset funds can take very different levels of risk. Also review how often the manager changes the mix, the benchmark, fees and any currency exposure. A balanced fund is a common type of multi-asset fund, usually centred on shares, bonds and cash.

A pooled investment vehicle that combines money from many investors into one professionally managed portfolio.

Example: A fund manager may combine ₦10,000 from one investor with contributions from thousands of others to buy treasury bills, bonds, or shares.

A mutual fund lets many people invest together. Each investor contributes money, and a licensed fund manager uses the combined amount to buy investments that match the fund's stated goal. A money market fund may buy treasury bills and short-term debtBorrowings due within one year., while an equity fund mainly buys shares.

For example, your ₦10,000 can be combined with money from thousands of other investors. You receive units that show your share of the fund, and the value of those units rises or falls with the investments the fund owns.

In a regulated Nigerian mutual fund, the manager chooses the investments, a trustee represents investors' interests, and a custodian safeguards the assets. Before investing, confirm that the fund and its service providers are registered with the SEC, then read the prospectus for the risks, fees, minimum investment and redemption time.

The value of a fund's assets minus its liabilities, usually expressed in total and per unit.

Example: A fund with ₦1.05 billion in assets and ₦50 million in liabilities has a total NAV of ₦1 billion.

Net asset value, or NAV, is what remains after subtracting everything a fund owes from everything it owns. NAV per unit is that amount divided by the number of units in circulation.

Suppose a fund owns ₦1.05 billion in investments and has ₦50 million in liabilities. Its total NAV is ₦1 billion. If it has 500 million units, NAV per unit is ₦2. A ₦100,000 subscriptionThe process of buying new units in a fund by submitting money and a valid instruction. would buy 50,000 units before any applicable charge.

NAV is normally calculated at a stated valuation time. With forward pricingA fund-pricing method under which orders receive a price calculated after the instruction is accepted., an instruction is processed using the next applicable valuation rather than an earlier published figure. A mutual fund's dealing priceThe price applied to a subscription, redemption, or switch in a fund. is based on NAV but may also reflect stated charges; an ETF has a separate market price that can trade above or below its NAV.

A fund that follows an index or systematic rule with limited discretionary security selection.

Example: A passive fund replicates the constituents of a broad equity index.

A passive fund follows a stated index or set of rules with little day-to-day security selection by the manager. Its goal is normally to reproduce the chosen benchmark's return, not to decide which investments will outperform.

For example, a passive fund tracking a broad share index buys the companies in that index, either in their index weights or through a representative sample. When the index changes, the fund adjusts its portfolio.

Passive funds often have lower fees than active funds, but passive does not mean risk-free. The fund will participate in losses in the market or strategy it tracks. Compare the fee, tracking difference, portfolio method and trading liquidity. In Nigeria, the choice of locally available passive funds may be limited.

A pool of retirement assets invested on behalf of members or beneficiaries.

Example: Contributions from workers are invested in bonds, shares, and other permitted assets.

A pension fund invests money set aside to provide income when people retire. Contributions from workers, employers or sponsors are combined and invested under rules designed for long-term retirement needs.

In Nigeria's contributory pension system, contributions enter a Retirement Savings Account managed by a Pension Fund Administrator. The money is invested across permitted assets such as government securities, corporate debt and shares, while a Pension Fund Custodian holds the assets.

A pension fund is not used like an ordinary mutual fund: withdrawals are restricted by pension law and retirement rules. Contributors should compare PFAs using long-term performance, service and consistency rather than one strong year. They should also understand the fund category assigned to them and whether the rules allow a change.

The formal document explaining a fund's objective, strategy, risks, fees, governance, and dealing rules.

Example: Before investing, an investor checks the prospectus for the minimum subscription, redemption period, and management fee.

A prospectus is the main legal document that explains how a fund works. It states what the fund may invest in, the risks investors accept, the fees charged and the rules for putting money in or taking money out.

Before investing, use it to answer practical questions: What can the fund own? What is the minimum investment? How much are the management and other fees? How long can a redemption take? Who are the manager, trustee and custodian?

Pay special attention to the investment rules and risk section. A product name such as “money market fund” is only a summary; the prospectus tells you the exact investments and limits. If a provider will not make the prospectus available, do not invest until you can review it.

A collective vehicle that owns or finances income-producing real estate and distributes qualifying income to investors.

Example: A REIT may earn rent from offices or shopping centres and distribute part of that income to unitholders.

A real estate investment trust, or REIT, pools investors' money to own or finance income-producing property. Investors can receive a share of rental or financing income without buying and managing an entire property themselves.

A REIT may own offices, warehouses or shopping centres. Rent pays property expenses and financing costs, and part of the remaining income may be distributed to investors. A listed REIT's units can be traded on an exchange, but a buyer may not always be available at the price you want.

Evaluate the properties, occupancy, tenants, debt, expenses and distribution history. Also compare the market price with the reported value of the underlying assets, while remembering that property valuations are estimates. Nigerian listed REITs can trade infrequently, so liquidity and the bid-offer spread deserve particular attention.

A fund focused on a defined geographic region.

Example: A West African fund invests across several markets in the region.

A regional fund invests within a defined part of the world, such as West Africa, Europe or Southeast Asia. It spreads money across countries in that region but remains exposed to events that affect the region as a whole.

A West African equity fund might hold companies in Nigeria, Ghana and Côte d'Ivoire. That is more geographically varied than a Nigeria-only fund, but currencies, regulation, commodity prices or political events can affect several holdings at once.

Check which countries qualify for the fund, how much is held in each one and whether a few large companies dominate the portfolio. Also review currency exposure, local market liquidity, taxes and custody arrangements. A regional label does not guarantee balanced investment across every country in the region.

A fund concentrated in one economic sector.

Example: A banking-sector fund owns shares primarily in banks and financial firms.

A sector fund concentrates on one part of the economy, such as banking, technology, healthcare or energy. It offers focused exposure rather than broad diversification.

A banking-sector fund, for example, may own shares in several banks and financial companies. Holding many banks reduces dependence on one bank, but the whole fund can still fall when regulation, interest rates or an economic shock hurts the banking industry.

Sector funds can benefit strongly when their chosen industry performs well and suffer strongly when it does not. Check which businesses the fund counts as part of the sector, how concentrated its largest holdings are, its fee and whether you already own the same sector through other funds.

A version of the same fund portfolio with different fees, currencies, distribution policies, or investor eligibility.

Example: Retail and institutional share classes may hold the same assets but charge different fees.

A share class is one version of a fund. Different classes invest in the same underlying portfolio but may charge different fees, require different minimum amounts, use different currencies or handle income differently.

For example, a retail class and an institutional class may own exactly the same investments, while the institutional class has a higher minimum and a lower fee. An accumulating class keeps income in the fund; a distributing class pays income to investors.

The class you choose can change your return even though the portfolio is the same. Compare the fee, currency, minimum investment, eligibility rules and income policy. Share classes are common in foreign corporate funds and ETFs; many Nigerian retail mutual funds offer only one class.

A fund managed according to Islamic finance principles and screened investment rules.

Example: The fund avoids interest-based businesses and uses approved instruments.

A Sharia-compliant fund invests according to Islamic finance principles. It avoids prohibited activities and structures, including conventional interest-based finance, and applies financial screens to the businesses it may own.

For example, an equity fund may exclude conventional banks, gambling and alcohol companies, then review the debt and non-compliant income of the remaining companies. A sukuk fund may use approved sukuk rather than conventional interest-paying bonds.

Check who sets and reviews the Sharia rules, which screening standard is used and how any non-compliant income is handled or purified. Sharia compliance describes how the portfolio is selected; it does not guarantee safety or profit. The fund still carries the market, credit, currency and liquidity risks of its actual investments.

A rules-based fund that weights securities using factors other than traditional market capitalisation.

Example: A smart-beta ETF weights companies by quality and value measures.

A smart-beta fund follows rules that weight securities by factors other than ordinary market size. Common factors include value, quality, momentum, low volatility and company size.

A normal market-cap index gives the largest companies the largest weights. A smart-beta quality fund might instead give more weight to companies with strong profits and lower debt. The process is rules-based, but choosing the factor and designing the rules are still active decisions.

The name does not mean the fund is automatically smarter or safer. A factor can underperform for years, and trading or rebalancing can add cost. Check the factor definition, weighting method, concentration, turnover, fee and performance across different market conditions. Also confirm that the rules do not simply repackage an expensive active strategy.

A state-owned investment fund established to manage public wealth or reserves.

Example: A country invests resource revenue through a sovereign wealth fund.

A sovereign wealth fund is owned by a government and invests public money for long-term national purposes. The money may come from resource revenue, budget surpluses, reserves or transfers from the state.

For example, a country that earns oil revenue may invest part of it in global shares, bonds and infrastructure instead of spending everything immediately. The fund may save for future generations, support economic stability or finance national development.

This is not normally a fund that individual investors can subscribe to. Its important questions are public: where the money came from, what mandate it follows, who oversees it, how results are reported and when government may withdraw funds. Nigeria's sovereign investment institution is the Nigeria Sovereign Investment Authority.

A fund that invests primarily in sukuk and other Sharia-compliant fixed-income-like instruments.

Example: A sukuk fund holds sovereign and corporate certificates that generate periodic distributions.

A sukuk fund invests mainly in sukuk: Sharia-compliant certificates linked to assets, projects or financing arrangements. Sukuk are designed to provide investment returns without using conventional interest-paying bonds.

For example, a fund may hold sukuk issued to finance government roads and corporate assets. Investors receive distributions generated under the sukuk contracts, and the certificates may be repaid or redeemed according to their terms.

A sukuk fund can still lose money. Prices may fall when market profit rates rise, and an issuer or obligor may fail to make payments. Check the issuers, maturity profile, credit quality, Sharia supervision, fees and how easily units can be redeemed. “Sharia-compliant” describes the structure and screening; it does not guarantee the return.

A fund organised around a long-term theme that may cut across traditional sectors.

Example: A clean-energy fund holds battery, solar, grid, and electric-vehicle companies.

A thematic fund invests around an idea expected to shape the future, such as clean energy, artificial intelligence or an ageing population. Unlike a sector fund, one theme can include companies from several industries.

A clean-energy fund might own solar manufacturers, battery producers, electricity-grid companies and electric-vehicle businesses. They share a theme, but they earn money in different ways and may face different risks.

A convincing story does not guarantee a good investment. Popular themes can attract money after share prices have already risen, and a loosely defined theme can hide unexpected holdings. Check the fund's selection rules, largest positions, valuation, fee and how much it overlaps with funds you already own.

An independent party appointed to protect unitholders' interests and oversee compliance with the trust deed.

Example: A trustee may challenge a manager that proposes an investment outside the fund's approved mandate.

A trustee is an independent institution appointed to protect the interests of a fund's investors. It checks that the fund manager follows the trust deed and the rules governing the fund.

If a manager proposes an investment that the fund is not allowed to hold, the trustee can question or stop the action. The trustee can also require the manager to correct a breach and may help oversee a replacement or orderly resolution if the manager can no longer perform its role.

The trustee protects the agreed process; it does not guarantee a profit. A fund can follow every rule and still lose value when its investments fall. You can find the trustee's name in the prospectus and verify its registration with the Nigerian SEC.

A proportional ownership interest in a mutual fund.

Example: If a fund's offer price is ₦2.00 and you invest ₦20,000, you receive 10,000 units before any applicable charge.

A unit shows how much of a mutual fund you own. When you invest, your money is converted into units at the fund's applicable price.

If the offer price is ₦2 per unit and you invest ₦20,000, you receive 10,000 units before any charge. If those units are later worth ₦2.20 each, your holding is worth ₦22,000. Your account value is therefore the number of units you own multiplied by the current unit price.

Open-ended funds create units when investors subscribe and cancel them when investors redeem. A higher account balance can come from a higher unit price, additional units bought with new contributions, or reinvested income, so check both your unit count and the unit price when reviewing performance.

A class of fund units distinguished by fee, currency, income, or access terms.

Example: A fund offers naira and dollar unit classes.

A unit class is a version of a unit trust with its own fees, currency, minimum investment or income policy. It is called a unit class because a unit trust issues units rather than company shares.

For example, the same fund may offer an accumulating unit class that keeps income invested and a distributing class that pays income out. It may also offer separate naira and dollar classes, although the prospectus must explain whether they share the same portfolio and how currency exposure is handled.

When several classes are available, first confirm that they invest in the same portfolio. Then compare fees, eligibility, currency and what happens to income. If only one class exists, as is common among Nigerian retail funds, there is no class choice to make.