In February, the global news media was awash with the story about how the world’s largest pension fund, Japan’s Government Pension Investment Fund, lost 9.1% or $136 billion in just three months.
Earlier on, it was reported that data from Wilshire Associates and Northern Trust show that Institutional investors in the US lost (on average) about 6.8% in the fourth quarter of 2018. According to the report:
“Plans in the Wilshire Trust Universe Comparison Service posted median returns of -7.05% and -4.05% for the fourth quarter and year ended Dec. 31, respectively”. “That performance represents the worst quarterly performance since the third quarter of 2011 (-8.53%), and the worst year since the financial crisis, when plans fell by -24.79%.”
Global Equity Market under-performed in 2018
The abysmal performance, as noted above, could have been the product of the global equity market melt down of 2018. This was rightly noted by Jason Schwarz, the President of Wilshire Analytics and Wilshire Funds Management who was of the view that “Equity exposure weighed on planned performance in the fourth quarter, as geopolitical concerns, earnings revisions, and higher interest rates led to a deterioration in investor sentiment.”
As a measure of how bad the global equity market was in 2018, the MSCI World ACWI ex-U.S. equity index posted quarterly and one-year returns of -11.46% and -14.2%, respectively while the Wilshire 5000 Total Market index, returned -14.29% and -5.27%, over those periods, respectively.
The story was different in Nigeria
The story seemed slightly different for Nigeria pension fund investors who saw their Retirement Savings Accounts ending the year with positive performance, some of which were in double digits. Those investors in the Retiree Fund category also had something to smile about as the fund managers gave them Christmas presents of positive returns.
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However, I cannot say the same for mutual funds, as year end data are not yet available for analysis. But if the year to date performance noticed in November is a prelude to what the year end results might look like, then investors in fixed income mutual funds will have something to be happy about; even as those in equity-based funds and exchange traded funds may not be as happy.
Yet, Nigerian Fund Managers deserve commendation
Whatever the result, Nigerian fund managers (especially pension fund managers) deserve some bottles of Champaign and a pat on the back for a job well done in 2018.