Nigeria’s National Pension Commission (PenCom) disclosed that the country’s total pension assets increased to N10.8 trillion as of May 2020, up from N10.6 trillion in April this year.
The report, which was published Monday on PenCom’s website, also revealed that the total number of Retirement Savings Account (RSA) holders had increased from N8.8 million as it was last reported, to more than 9 million as of May this year.
The report went further to break down the various asset classes in which the pension funds have been invested. For instance, a bulk of the funds (about N7.2 trillion representing 66.7%) was invested in Federal Government’s Securities. The table below contains the complete breakdown.
Meanwhile, PenCom’s Acting Director-General, Aisha Dahir-Umar, said pension fund managers have been very cautious about where they invest. She also offered further explanation, saying:
“Since the introduction of the Multi-Fund Structure that created four different funds, the investment of the funds has varied from one another. Fund 1 has a maximum limit of 30 percent, Fund II has a maximum of 25 percent and Fund IV allows maximum of five percent.
“The allowable exposures to variable income instruments have been designed such that Fund I has the highest allowable limit, followed by Fund II, III and IV. This reduces the risk and uncertainty of contributors in line with their ages.’’
Recall that a recent article by Nairametrics mentioned how the COVID-19 pandemic had caused a drastic reduction in the rate at which new Retirement Savings Accounts (RSA) is being opened. Apparently, many companies have been unable to recruit new employees since the pandemic hit Nigeria and wrought economic challenges on different sectors. Unfortunately, PFAs’ failure to open sign up new RSA accounts could affect the total pension assets in the long run.
Nigeria’s pension funds continue to divest from treasury bills
Since the beginning of 2020, pension fund managers have moved out about N1.112 trillion of treasury bills investments into mostly FGN Bonds.
As the low-interest regime that characterized most of 2020 continues with no immediate sign of an increase, pension fund managers have also continued to rid their portfolios of treasury bill investments.
Analysis of the recently released September 2020 edition of Pension Fund assets, by the Pension Commission of Nigeria, PenCom, shows that pension fund managers reallocated their assets away from treasury bills to FGN Bonds.
In the month of September 2020, according to the latest report, pension fund managers closed out of treasury bill positions worth N0.224 trillion while loading up on FGN bonds worth N0.254 trillion. Since the beginning of 2020, pension fund managers have moved out about N1.112 trillion of treasury bills investments into mostly FGN Bonds.
At the beginning of 2020, total pension fund assets invested in treasury bills stood at N1.88 trillion, but that has fallen to N0.78 trillion as at the end of September 2020. Put in another way, as at the end of 2019, 18.4% of pension fund assets were invested in treasury bills but as at September 30, 2020, pension funds’ treasury bill investment stood at 6.7%
Implications for domestic borrowing and monetary policy
Treasury bills serve a whole lot of purposes for the government. They are used as a means for the government to borrow to cover short term budgetary deficits as well as a means for the Central Bank to manage the supply of money and its inflationary effects.
With the increasing and seeming lack of interest by pension fund managers, who, usually are big players in the treasury bill market, the government may find it a bit problematic raising the much-needed domestic borrowing from them.
In like vein, the Central Bank’s ability to implement monetary policies through treasury bills and others, open market operation, may also suffer. May be, fiscal policy may become a more potent instrument of economic management, if that happens.
Nigeria’s Mutual Fund asset value grew by 50% in 2020
2020 appears to be the year with the highest growth in the value of mutual fund assets in Nigeria.
While the year 2020 will go down in the annals of history as one of the worst years in the history of mankind, it was not so bad for the Nigerian mutual fund industry.
Interestingly, 2020 appears to be the year with the highest growth in the value of mutual fund assets in Nigeria.
According to data from the Security and Exchange Commission, SEC, the total value of mutual funds in Nigeria stood at N1.042 trillion as at the end of 2019. The same data source now shows that as at the end of 2020, the net asset value, NAV of Nigerian mutual fund had risen to N1.572 trillion, representing an increase of 50.79%.
A deeper analysis of the industry reveals that in 2020, mutual fund contributions amounted to about N0.903 trillion while redemptions amounted to about N0.42 trillion. The same analysis points to the fact that mutual funds gathered an estimated sum of N46.7 billion in gains.
Compared to 2019, the capital activities, comprising of subscriptions and redemptions were slightly far afield. In 2019, subscriptions stood at N0.52 trillion while redemptions came up to N0.14 trillion, resulting in a net inflow of N0.38 trillion. Net inflows for 2020 stands at N0.483 trillion. Unlike in 2019, when mutual funds made an estimated gain of N9.9 billion, the N46.7 billion made in 2020, makes Corona Virus a non-issue for the industry.
Majority of the funds ended 2020 in the black, as 15, out of the 118 mutual funds on the SEC’s NAV Summary Report. The good thing about it is that no particular fund group dominated in making gains.
Although most of the funds that recorded huge gains came from the Euro Dollar category, Bond and Fixed income funds were not left behind as a whole lot of them stood out with mouth-watering gains. Out of nowhere, Stanbic IBTC Nigeria Equity fund sneaked in with some sizable gains too.
On the downside, the two funds that recorded the greatest losses came from the Real Estate Investment fund category. Apparently, the Real Estate Investment Trust funds have not been doing good. Be that as it may, it is laudable that the Nigerian mutual fund industry stood out in 2020.
NLPC, Investment One and OAK PFAs generate highest ROI in three RSA funds for 11 months
The top PFAs with the highest return on investment (ROI) across three RSA funds, from January to November 2020.
NLPC Pension Fund Administrators Limited, Investment One Pension Managers Limited and OAK Pensions Limited have emerged in the elite list (top five) of PFAs with the highest return on investment (ROI) across three RSA funds, from January to November 2020.
This is according to a disclosure by Pension Nigeria, seen by Nairametrics. According to the disclosure, the RSA funds in which the aforementioned firms made the elite list include; RSA Fund II, RSA Fund III and RSA Fund IV. Both Investment One and NLPC missed out of the top five in the RSA Fund I category.
RSA Fund I
The RSA Fund I is a special but optional fund in which RSA account holders who are below 50 years of age can opt-into. The top 5 PFAs with the highest rate of Returns on Investment (ROI) for the period under review are;
- APT Pensions Fund Managers Limited led the chart with 40.59%
- Followed by Veritas Glanvills Pensions Limited with 38.65%
- AXA Mansard Pensions Limited recorded returns of 37.31%
- Stanbic IBTC Pension Managers Limited recorded 34.10%
- OAK Pensions Limited completed the elite list with 33.28%.
RSA Fund II
The RSA Fund II is the default fund under the Multifund structure for RSA holders who are below 50 years old. The top 5 PFAs with the highest ROI in this category include are;
- NLPC Pension Fund Administrators Limited recorded a 52.11% ROI in this category.
- Followed closely by Investment One Pension Managers Limited with 29.90% ROI.
- IEI-Anchor Pension Managers Limited recorded returns of 28.41%
- OAK Pensions Limited recorded returns of 24.02%
- Fidelity Pensions Managers Limited completed the top 5 with returns of 23.56%.
RSA Fund III
RSA Fund III is the default fund for RSA holders who are 50 years and above but have not retired. The top five in this category for the period under review are;
- NLPC Pension Fund Administrators Limited also led the chart in this category, recording returns of 44.58%
- Investment One Pensions Managers Limited followed closely with returns of 35.29%.
- AXA Mansard Pension Limited recorded returns of 31.02%
- Radix Pension Fund Managers Limited recorded returns of 29.97%
- OAK Pensions Limited completed the top five in this category with returns of 27.75.
RSA Fund IV
This is the Retiree Fund. All RSA holders that have retired are automatically moved to Fund IV. The top five in this category are;
- NLPC Pension Fund Administrators Limited led with 37.71%
- Investment One Pension Managers Limited followed closely with 35.14%
- Fidelity Pension Managers Limited recorded returns of 23.85%
- Radix Pension Fund Managers Limited recorded returns of 21.09%
- Nigeria Police Force Pensions Limited completed the top five in this category with returns of 20.29%
The chart below shows all PFAs based on the average returns on Investment for each PFA for January to December.
What you should know
- No PFA had a negative return on investment for the period under review.
- The Industry Average for all the funds type is 19.83%. Fund I recorded an average ROI of 21.99%. Fund II recorded an average of 20.93%. Fund III posted an average of 20.14%. Fund IV posted an average of 16.13%.
- No PFA was among the top 5 in all the four funds.
- Recall that Nairametrics had earlier reported that TrustFund, Radix Pension Fund Managers Limited, and three others had emerged in the top 5 most profitable PFAs for RSA fund II in the month of November 2020.