In a year When the World’s largest pension fund, the Japanese Government Pension Investment Fund loses 9.1% or 14.8 trillion Japanese Yen, amounting to a whopping $136 billion, Nigeria’s pension fund industry continues to bask in positive performance. I had reported earlier that Nigeria’s Retirement Savings Accounts, RSA, made an average of 9% positive return in 2018 led by the 15% return generated by Premium Pensions Retirement Savings Account. I am here again to report that the Retiree funds, otherwise known as fund IV, following the introduction of the multi fund strategy by the National Pension Commission, PenCom, made an average return of 12.66%.
The Retiree fund is one of the most conservative funds in the Nigerian pension industry investing almost exclusively in fixed income securities like Treasury Bills and FGN Bonds. Their little or no exposure to the equity market saved the Retiree Funds from the volatilities of the market in 2018.
Out of the 21 Retiree funds being tracked by Quantitative Financial Analytics Ltd, 19 of them made double digit positive returns while two recorded positive returns in the single digit. Like what happened with RSA Funds, APT Pensions Retiree Fund, which is the Retiree Fund with the greatest exposure to equities, made the lowest return of 6.11% as a result of the poor performance of the equity market in 2018. Here is the best five Retiree Funds:
Best Performing Fund
Name of Fund: Stanbic IBTC Retiree Fund 4
YTD Performance %: 15.54%
YTD Gain per unit: N0.49
Second Best Performing Fund
Name of Fund: AXA Mansard Pension Retiree Fund 4
YTD Performance %: 15.08%
YTD Gain per unit: N0.36
3rd Best Performing Fund
Name of Fund: Arm Pensions Retiree Fund 4
YTD Performance %: 14.78%
YTD Gain per unit: N0.42
4th Best Performing Fund
Name of Fund: NPF Pensions Retiree Fund 4
YTD Performance %: 14.1%
YTD Gain per unit: N0.16
5th Best Performing Fund
Name of Fund: Oak Pensions Retiree Fund 4
YTD Performance %: 14.04%
YTD Gain per unit: N0.40
For a complete list of Retiree fund performance, contact Quantitative Financial Analytics Ltd.
NSE Pensions Index Performance
Compared to the NSE Pensions Index, which is predominantly equity based, both RSA and Retiree funds outperformed the index. The 2018 YTD performance of the index stood at minus 12.49% meaning that the best performing RSA and Retiree funds are outperforming the index by about 25% and 27% respectively.
Did Pension Funds Beat Inflation in 2018
One of the concerns of retiree as well as those saving for retirement is the extent to which their funds’ positive return, or lack thereof, compares to the rate of inflation. The essence of this concern is that, when it is all said and done, what matters is how much the pension savings can afford to buy and by implication, how long the pension savings will last.
According to the Central Bank of Nigeria (CBN)’s website, inflation rate in the country was 11.44% in December 2018. The implication of this is that none of the Retirement Savings Account, RSA, was able to beat inflation as the highest of such funds returned 11.25%. So, in real terms, they made negative returns. On the other hand, 16 of the 21 Retiree Funds made returns that beat inflation with Anchor Pensions Retiree Fund breaking even as it returned 11.44%, the same rate as inflation. The remaining 3 Retiree Funds’ returns were below the inflation rate.
Inspite of the effect of inflation on the returns, Nigerian pension fund managers should be commended for making positive returns when the ‘rest of the world” isn’t.