Two mutual funds can show the same "return" in an advert and leave you with very different money after a year. The difference is usually on page two of the fund fact sheet, in the lines most people skip. This guide shows you which lines to read, in what order, and how to turn small-looking charges into naira you can compare.
A fact sheet is a short document, usually one or two pages, that a fund manager publishes monthly or quarterly. It is a marketing document and a disclosure document at the same time. Your job is to read the second part and be sceptical of the first.
Where to get the fact sheet (and the full documents behind it)
Ask the fund manager or your stockbroker or banking app for the latest fact sheet, and check the manager's website. Also ask for the prospectus or "scheme particulars" and the most recent annual report. The fact sheet summarises these; where the two disagree, the longer document wins.
Before reading anything else, confirm the fund and its manager are registered with the Securities and Exchange Commission (SEC) in Nigeria. Check on the SEC's own website or by contacting them, not through a link or number sent by the person selling you the product. Ghana, Kenya and South Africa have their own regulators (the SEC Ghana, the Capital Markets Authority in Kenya, and the FSCA in South Africa), so check with the one in the country where the fund is sold.
The seven lines to read, in order
1. Fund type and objective
Is it a money market fund, a fixed income (bond) fund, a balanced fund, or an equity fund? This tells you how much your balance can swing. A money market fund holds short-term instruments and normally moves gently. An equity fund can fall sharply in a bad year. If the objective says "capital growth" and you need school fees in six months, that is a mismatch before you even look at charges.
2. Date of the sheet
Check the "as at" date. A sheet that is four months old tells you about the past, not today. Download the newest one every time you add money.
3. Unit price or NAV
NAV means net asset value per unit. It is the price of one unit of the fund on that date. A low unit price does not mean a "cheap" fund and a high one does not mean "expensive". What matters is how the price changes over time, and whether the fund pays out income or adds it to the unit price. Some funds pay distributions; others reinvest them. Know which one yours does, so you do not think you "lost" money when a payout drops the price.
4. Performance, and what it is compared with
Look for three things next to any return figure:
- The period. One month, year-to-date, one year, since inception. Managers love to show whichever period looks best.
- Whether it is net of fees. Ask: "Is this return after all charges?" If the sheet doesn't say, treat it as uncertain.
- The benchmark. A fair comparison for a money market fund is something like short-term government securities. If a fund compares itself to something easy to beat, that tells you little.
Also watch for annualised numbers built from a short, good month. A one-month return multiplied by twelve is not a promise.
5. Portfolio breakdown
This shows what the fund actually holds: treasury bills, bonds, commercial paper, bank placements, shares. Check:
- Government versus company exposure. Government paper and corporate paper carry different risks. A big share in one or two company issuers is a concentration risk.
- Bank placements. If a large portion sits in fixed deposits at a few banks, you are relying on those banks.
- Maturity. Look for "weighted average maturity" or "duration". Longer means more sensitivity to interest-rate changes, so more price movement.
- Top holdings. If the top three items are most of the fund, the fund is not as diversified as it sounds.
6. Fund size and age
A very small or very new fund has little track record, and a few large investors leaving can hurt the rest. That does not make it bad, but it means you should ask more questions. Look at how fund size has moved over a year, if the sheet shows it.
7. The fees section
This is the most important part for hidden costs, and it gets its own section below.
Every charge to look for
Charges come in two types: those taken from the fund (you pay them indirectly through a lower unit price) and those you pay when you buy or sell. Here is a checklist.
| Charge | Who pays and when | What to ask |
|---|---|---|
| Management fee | Taken from fund assets, ongoing | What percentage a year, and is it already reflected in the quoted return? |
| Trustee and custodian fees | Taken from fund assets, ongoing | Are they inside or on top of the management fee? |
| Other fund expenses | Audit, registrar, legal, regulatory, taken from the fund | Is there a "total expense ratio" figure that adds everything? |
| Entry (front-end) charge | You, when you buy units | Is there a charge, or is the buy price different from the sell price? |
| Exit (redemption) charge | You, when you sell units | Does it fall the longer I stay? Is there a minimum holding period? |
| Performance fee | Taken from fund if returns beat a target | What is the target and is there a cap? |
| Platform or agent charge | You, via the app or broker you buy through | Do they add anything on top of the fund's own charges? |
| Bank or transfer charges | You, when paying in or withdrawing | Is withdrawal to my account free, and how many days does it take? |
I am not listing typical percentages because they differ by fund, change over time and should come from the document in your hand. If a fact sheet shows no fee information at all, ask for it in writing. A manager who cannot give you a clear fee list is telling you something.
A worked example: what a 1% difference does
This is a hypothetical. Say you put ₦1,000,000 into one of two funds. Before charges, both earn 20% in a year. Fund A takes 1% a year in total expenses. Fund B takes 2.5%.
- Fund A net return: 20% minus 1% = 19%, so about ₦190,000.
- Fund B net return: 20% minus 2.5% = 17.5%, so about ₦175,000.
The gap is ₦15,000 in a single year, on a modest amount. Now add a 1% exit charge to Fund B if you sell early: another ₦10,000 or so on a ₦1,000,000 balance. Over three years of compounding, the gap grows. Numbers like these are why the "total expense ratio" matters more than the headline return.
Now look at it from the other side. If Fund B holds riskier assets and genuinely earns a higher gross return, it could still win. That is the second question: is the extra charge buying extra return, or just taking it? You find out by comparing returns after fees, over the same period, against the same benchmark.
Signs a fact sheet is hiding something
- Only the best period is shown, and there is no calendar-year history.
- Returns are quoted with no mention of whether fees are deducted.
- The fees section says "see prospectus" and the prospectus is not offered.
- Words like "guaranteed" or "risk free" appear on a fund that holds anything other than a government-backed product. Unit trusts do not guarantee returns.
- The agent talks about how much you will make each month but not about how you will exit.
- Pressure to decide today, or a request to pay into a personal account instead of the fund's collection account.
That last one is a fraud sign, not a fee issue. Pay only into the account named in the official documents, and confirm it with the manager through a number from their official website. Our guide to fake portals in Nigeria covers how to check you are on the real site.
Five questions to send before you invest
- What is the total annual cost of this fund, as one percentage, including management, trustee, custodian and other expenses?
- Is there any entry or exit charge, and does it change with how long I hold?
- Are the returns on your fact sheet after all fees?
- How long does a withdrawal take from request to cash in my account, and are there limits?
- Which regulator approves this fund, and what is its registration status?
Keep the reply. If the answers later turn out to be wrong, you have a record.
Matching the fund to your goal
Charges matter, but so does the purpose of the money. Money you need within a year, such as rent or school fees, belongs somewhere you can reach quickly and that does not swing much; our sinking funds guide shows how to split it by goal. If you want a government-backed option with a fixed term, compare it with the FGN Savings Bond. And if you are weighing naira against dollar assets, read saving in naira vs dollars first, because currency can matter more than a half-percent fee.
Frequently asked questions
Is a higher return on the fact sheet always better?
No. A higher return can come from taking more risk, a short lucky period, or numbers shown before fees. Compare net returns over the same period, and look at what the fund holds.
Is a fund with no entry or exit charge free?
No. It still has ongoing expenses taken from the fund. You don't see them as a bill, but they reduce your unit price growth.
How often should I check the fact sheet?
At least quarterly, and before you add money or withdraw. Look at fees, the portfolio breakdown and fund size for any change.
What if my agent cannot explain a fee?
Ask for it in writing from the fund manager. If you still get no clear answer, treat that as a reason to wait or choose another fund.
Your next step
Pick one fund you already hold or are considering, download its latest fact sheet, and fill in this line: total annual cost, entry charge, exit charge, benchmark, top three holdings. If any box stays empty, send the five questions above today.
This article is for general information only and is not financial, legal, or tax advice. Prices, rates and rules change quickly, so check current details before making money decisions.