Best Performing Fixed Income Funds in Q2 2025

Nigerian fixed-income funds delivered impressive performance in Q2 2025, with top performers yielding over 20% despite challenging market conditions. As investors seek alternatives to volatile equities and protection from inflation, professionally-managed bond funds have emerged as compelling investment options. 

According to Securities and Exchange Commission (SEC) data for the week ended July 4, 2025, fixed income funds collectively manage over ₦200 billion in assets, providing Nigerian investors with diversified exposure to government bonds, corporate debt, and money market instruments. 

Top 10 Performing Fixed Income Funds in Q2 2025 

Based on year-to-date yields from the latest SEC valuation reports, here are Nigeria's best-performing fixed income funds: 

Market Performance Analysis 

The exceptional performance of fixed income funds reflects Nigeria's evolving bond market dynamics in Q2 2025. Despite initial bearish sentiment that pushed average yields up 24 basis points to 18.67% in April, the quarter ended positively with yields declining 63 basis points in June. 

Key Performance Drivers: 

• FGN Bond Market Recovery: Average yields closed Q2 at 17.97%, down 70 basis points quarter-over-quarter 

• DMO Auction Success: Strong demand for newly issued bonds, with ₦602 billion subscriptions against ₦100 billion offered 

• Economic Stability: Inflation stabilization and improved economic sentiment supported bond prices 

• Liquidity Conditions: Ample system liquidity averaging ₦812.26 billion during the quarter 

Fund Size vs Performance Insights 

Interestingly, the best-performing fund, Comercio Partners Fixed Income Fund, manages just ₦161.8 million with only 30 unitholders, demonstrating that boutique fund managers can deliver superior returns through focused strategies. 

Large Fund Performance: 

• SFS Fixed Income Fund: 19.02% yield, ₦9.3 billion NAV 

• United Capital Stable Income Fund: 21.38% yield, ₦32.9 billion NAV 

• Stanbic IBTC Bond Fund: 0.10% yield, ₦17.3 billion NAV 

The performance disparity highlights the importance of active management and strategic positioning over mere fund size. 

Fixed Income vs Other Asset Classes 

Fixed income funds provided stability during Q2 2025's market volatility, contrasting with equity market fluctuations. While money market funds averaged 21%+ returns, fixed income funds offered competitive yields with additional duration exposure and potential capital appreciation. 

Investment Advantages: 

• Stable Income Streams: Regular coupon payments from government and corporate bonds 

• Capital Preservation: Focusing on high-quality debt instruments reduces default risk 

• Professional Management: Expert portfolio optimization across the yield curve 

• Tax Benefits: Interest on FGN bonds remains tax-exempt 

Risk Considerations 

Interest Rate Risk: Rising rates can negatively impact bond prices, though higher yields benefit new investments. 

Credit Risk: Corporate bond exposure requires careful credit analysis and diversification. 

Liquidity Risk: Some funds may face redemption pressures during market stress. 

Inflation Protection: While yields appear attractive, real returns depend on inflation trends. 

Investment Strategy Recommendations 

For Conservative Investors: Consider funds like United Capital Stable Income Fund or ARM Fixed Income Fund, which combine scale with consistent performance. 

For Yield Seekers: Smaller boutique funds like Comercio Partners or Radix Horizon offer higher returns but require higher risk tolerance. 

For Diversification: Combine fixed income funds with money market alternatives to optimize risk-adjusted returns. 

Market Outlook 

Nigeria's fixed-income sector benefits from attractive yields and improving economic fundamentals. The Central Bank's monetary policy stance continues to support bond market performance, while fiscal discipline enhances government bond creditworthiness. 

Positive Factors: 

• Continued foreign investor interest in Nigerian bonds 

• Stable inflation trajectory supporting real returns 

• Strong domestic pension fund demand for long-term bonds 

Getting Started 

Ready to explore fixed income investment opportunities? Use nairaCompare's fixed income fund comparison tool to evaluate funds based on performance, fees, and investment objectives. 

Bottom Line: Q2 2025 demonstrated fixed income funds' resilience and income-generating potential, with top performers delivering 15-30% yields. These professionally-managed funds offer Nigerian investors stable alternatives to volatile equity markets while providing attractive returns above inflation.