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Funds Management

Nigeria’s Micro Pension industry: A gold mine waiting to be tapped

The Nigerian government expanded the Pension Reform Act (PRA) of 2014 to include provisions for Micro pensions.

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Micro Pension Plan

According to a report from Price Waterhouse Cooper (PWC), Nigeria has about 59.6 million workers in the informal sector. A projection from the same report says that if those 59.6 million workers set aside N100 weekly into a pension fund in 2016, by the end of 2017, Nigeria’s Micro Pension industry would be worth N61.1 billion if such contributions were invested at a real return of 4.5% per year. Extrapolate that five-year-old projection to today, and you will be amazed at the worth of Nigeria’s Micro Pension industry. In recognition of the potentials hidden within the Nigerian micro pension industry, the Nigerian government expanded the Pension Reform Act (PRA) of 2014 to include provisions for Micro pensions.

The National Pension Commission then followed that up with the design and publication of “frequently asked questions on Micro Pension fund”, a document that seeks to answer potential questions that people may have regarding micro pension scheme. The beauty of that document is that it is in English, Igbo, Yoruba and Hausa, so that those that are not literate in English language still have the opportunity to read, understand and take advantage of the benefits of micro pension funds.

Success Stories Elsewhere: Micro pension schemes have been known to be successful in places like India, and Kenya, but to what extent has it succeeded in Nigeria? There are indications that the scheme has not been as successful as hoped for, in Nigeria, either because of lack of interest by those for whom the scheme was created or due to lack of awareness and enlightenment campaigns.

Nigerians have always relied on their children for their comfort at retirement but that is fast changing with so many of such children unemployed many years after leaving or graduating from schools. It is therefore imperative that parents get into plan “B”, by enlisting into micro pension plans so that if their children fail to provide for them at retirement, they have something to fall back on.

Fund Managers Have A Role to Play: With so much potential in the micro pension industry, fund managers stand to gain by way of the fees they charge, it is therefore of importance that they get into being more active in creating awareness for this laudable scheme. A visit to the various fund managers’ websites indicates that some of them have information about micro pensions on their website. It does not appear, however, that many of them are active in the scheme as lots of them do not have the pricing information of micro pension funds as part of their daily price releases. This copious absence may be an indication of lack of activity.

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Micro Pension Fund Performance: Only a few of the pension fund managers seem to have active participants of micro pension scheme and Quantitative Financial Analytics conducted a performance analysis of those few.  The few are AIICO, ARM, Premium, AXA, PAL and NLPC.  It is quite pathetic that out of about 20 pension fund managers, only 5 are active with Micro pension scheme. Most of the data we collected went back to July 2019 and it is on that basis that the performance analysis was conducted. Of the few active micro pension funds, PAL micro pension fund has the highest return of 5.46%, followed by ARM Micro pension with 5.15%.  AIICO micro pensions took third place with a return of 2.95%.

Source: Quantitative Financial Analytics

Conclusion: Though the absence of pricing information on the fund managers’ web site may not necessarily indicate inactivity, fund managers are encouraged to include that information among the information provided for the other pension funds as all investors deserve to be equally served. In addition, the presence of such information can act to increase the awareness of prospective pension fund contributors and can as well act as marketing tools for the fund managers. Micro pension scheme is still new in Nigeria and we will continue to monitor and report on progress.

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Uchenna Ndimele is the President of Quantitative Financial Analytics Ltd. MutualfundsAfrica.com and mutualfundsnigeria.com (both Quantitative Financial Analytics company website) is a leader in supplying mutual fund information, analysis, and commentary on African mutual funds. We provide reliable fund data; and ratings information that will add value to fund managers, the media, individual investors and investment clubs.

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Funds Management

Before you transfer RSA: Best Pension Fund managers in Nigeria (1)

Pension fund managers based on the availability of information on the website, responsiveness to inquiries, and ease of navigation of the websites, among other factors.

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Pension

In a recently published article, I did a piece on what to look for in a fund manager. Since then, a few people have contacted me to ask for my recommendations.

Unfortunately, I do not recommend fund managers, however, I try as much as possible to put the facts out there and leave readers, RSA holders and investors, to make their choice. This is even more important now with the transfer window open for RSA holders.

For those who want to use the pension fund performance as part of the decision variable for choosing where to transfer to, please refer to my recent piece on the YTD ranking of pension funds or contact me directly via the comments page of this article.

READ: Sacked workers cash in N2.56 billion in 25% early pension withdrawal

Recently, I did a piece on the most transparent pension fund administrators in Nigeria, that article too can be a reference point. Although, a lot has changed since I wrote that piece, either as a result of the article or as a result of adherence to best practice requirements by the pension fund administrators or managers.

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So, here are my take on pension fund managers based on the availability of information on the website, responsiveness to enquiries, and ease of navigation of the websites, among other factors, in no particular order.

READ: SEC extends deadline for filing quarterly financial statement due on October 30, 2020

OAK Pension Fund Administrators

Wow! OAk, you rock! This fund administrator packaged the pricing information in such a downloadable form that anyone can see it in pdf format for the entire month. However, the only issue is that for anyone without the ability to translate pdf files into excel, the historical analysis may be a problem.

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Current and past Funds’ audited financial statements are also available for download. I did not see a chart of the fees or portfolio structure, two pertinent pieces of information that investors may need.

Explore Data on the Nairametrics Research Website

Sigma Fund Administrators

Its presentation of the daily reporting for all four funds is a beauty to behold. The data comes in an easily downloadable form. With their information on portfolio structure, it is easy to know what the funds are invested in and to what extent.

You can also easily find the fee structure, which shows you how much fee you are or will be charged. Also available, are current and past audited financial statements for the various pension funds.

READ: NNPC releases audited financial statements, refineries record losses of N154 billion

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First Guarantee Fund Administrators

It reported on all 4 in the last 10 business days, thereby meeting the minimum requirement. Again, it would have been good to show the entire month for people who had no time to visit the site weekly.

Stanbic IBTC

The implication of this is that historical data is lacking on the site. There is information on portfolio structure, so it is easily discernible what the funds invest in, however, I could not see any fee chart that shows what investors are being charged. There are audited financial statements but they take an undue amount of time to open up when clicked on.

READ: PZ Cussons suffers a pre-tax loss of N7.984 billion in 2020

Stanbic IBTC Fund Administrators

This is one of the most transparent fund managers in Nigeria in mutual and pension funds. In a beautiful format that can be copied, this fund administrator reports its prices for all 5 funds (including micro pension fund). With portfolio structure information readily available and up to date, you can see where your funds reinvested.

However, the only information I saw about fees, is the flat administration fee charge. There is need to put any other fee charged out there for investors to see. The audited financial reports on display are about the pension fund and fund returns for 2019. I did not see the returns for earlier years, although there is information on 3-year rolling returns.

Anchor Fund Administrators

It reports in a very imaginative form, where you can get pricing information for a long period of time. There is also an updated portfolio structure detailing what the funds are invested in and the percentages. There is also a rate of return page where you can see the historical performance of the funds. There are current and past financial reports on display for download and analysis.

READ: Nigeria’s pension fund assets increase to N8.14 trillion

Legacy Pension Fund Administrators

It reports on funds – all 5 funds (including micro pension fund), on beautifully and strategically positioned clickable icons on their website. The icons which opens up when you click on the view history, displays the required information which is accessible by defining the period of interest.

Information on the portfolio structure comes in a downloadable format, so you can easily know what the funds are invested in. There is information about the admin fees charged, but that is so close to the price icon that you need to look very closely to see.

The annual rate of return of the funds is also available dating from 2006 (depending on when the fund was launched). You can also see each fund audited financial statement, the latest of which is for 2019, as expected.

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READ: Why African Alliance has not released its FY 2019 and Q1 2020 results

ARM Pension Fund Administrators

It reports on all 5 funds (including micro pension fund) on beautifully positioned and strategically clickable icons on their website. Past and current funds’ audited financial statements are readily available. It does not, however, look like there were information on portfolio structure, fee or rate of returns as I could not find those on the web site.

Conclusion

I will be releasing another part of this piece as it is not possible to evaluate all the PFAs in one article. So, stay tuned.

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Funds Management

Cowrywise launches 6 new mutual funds

Cowrywise has partnered with Asset and Resource Management Holding Company (ARM Holdco) to launch six new mutual funds.

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Cowrywise to re-launch as Cowrywise Circles

In a bid to attract more first time investors into the mutual funds’ space, Cowrywise recently announced its partnership with Asset and Resource Management Holding Company (ARM Holdco) to launch six (6) new mutual funds.

This is according to a disclosure by the firm, as seen by Nairametrics.

What they are saying

Cowrywise said: “We are excited to launch 6 new mutual funds from Asset and Resources Management Holding Company (ARM Holdco) on Cowrywise. With this partnership, Cowrywise users get more quality investment options in Naira and dollars. Also, this is in line with our continuous drive to get 10 million first time investors into the mutual funds’ space.”

What you should know

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The six (6) new mutual funds listed are; ARM Eurobond Fund (Dollar fund), ARM Discovery Balanced Fund, ARM Aggressive Growth Fund, ARM Ethical Fund (Halal investments), ARM Money Market Fund, and ARM Fixed Income Fund.

According to Investopedia, a mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.

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Funds Management

Pension Fund performance ranking for October 2020

Below are the 5 best performing RSA funds as at the end of October 2020, on a year to date (YTD) basis.

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Pension funds

In what could be best described as magic, in an environment where the markets all over the world are grappling with the effects of a pandemic, Nigerian pension fund managers are churning out positive performances in double digits.

The high-interest regime that characterized the Nigerian market in the early to the tail end of 2019 paid off for many pension funds in Nigeria who recorded impressive performances in 2019. It, however, beats my imagination that under current low-interest regime of 2020 and other headwinds in the market, that pension fund managers would even do better, in terms of performance in 2020.

Going by an analysis conducted by Quantitative Financial Analytics based on pricing information gleaned from various fund managers’ websites, the Retirement Savings Account (RSA) category made an average of 18.61%, with returns ranging from 52% to 8.99%.

Information about the performance of Crusader Pension RSA was not available and efforts to get such information yielded no result. Crusader Pensions RSA is therefore excluded in this report.

Below are the 5 best performing RSA funds as at the end of October 2020, on a year to date (YTD) basis.

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Best Performing Fund:

Name of Fund: NLPC Pensions RSA Pension Fund 2

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YTD Performance %:  52%

YTD Gain per unit:  N2.05

 

2nd Best Performing Fund:

Name of Fund: AXA Pensions RSA fund 2

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YTD Performance %:  29.2%

Stanbic IBTC

YTD Gain per unit:  N0.88

 

3rd Best Performing Fund:

Name of Fund: Anchor Pensions RSA Fund 2

YTD Performance %:  26.87%

YTD Gain per unit:  N0.73

 

4th Best Performing Fund:

Name of Fund: Fidelity Pensions RSA Fund 2

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YTD Performance %:  23.34%

YTD Gain per unit:  N0.75

 

5th Best Performing Fund:

Name of Fund: OAK Pensions RSA Fund 2

YTD Performance %:  22.44%

YTD Gain per unit:  N0.68


 

Retiree Fund Performance

Retiree Pension funds, otherwise known as fund 4, performed slightly less than the RSA funds. On average, Retiree funds generated an average return of 15.15% on a YTD basis as at October 2020. The returns which ranged from 39.26% to 7.65% have the NPLC Retiree fund taking the lead. Again, Crusader Retiree Pensions funds is excluded from the analysis for lack of data.

Here are the best 5 Retiree funds.

 

Best Performing Fund:

Name of Fund:  NLPC Pension Retiree Fund 4

YTD Performance %:  39.26%

YTD Gain per unit:  N1.34

 

2nd Best Performing Fund:

Name of Fund: Investment One Pensions Retiree fund 4

YTD Performance %:  36.18%

YTD Gain per unit:  N0.91

 

3rd Best Performing Fund:

Name of Fund: Fidelity Pensions Retiree Fund 4

YTD Performance %:  24.64%

YTD Gain per unit:  N0.81

 

4th Best Performing Fund:

Name of Fund: AXA Pensions Retiree Fund 4

YTD Performance %:  21.56%

YTD Gain per unit:  N0.65

 

5th Best Performing Fund:

Name of Fund: NPF Pensions Retiree Fund 4

YTD Performance %:  19.19%

YTD Gain per unit:  N0.28

 

PENCOM Transfer Window

The type of performance noted above is good news for retirement planning. The goal of anyone planning and saving for retirement is to make such gains that would enable them retire gracefully and with so much financial accumulation that could help them do just that.

The importance of knowing how pension funds have and continue to perform cannot be timelier than now, given that the National Pension Commission of Nigeria has opened the transfer window for RSA account holders to decide on where to transfer their pension funds.

While it is widely known that past performance is not an indication of future performance, pension fund performance alone should not be the only reason or decision variable in transferring from one pension fund administrator (PFA) to another.

RSA account holders are enjoined to make their decisions as holistic as possible by considering all the factors before they move their funds. For those who want a complete list of the YTD performance of pension funds, you can make such request through the comment section of this publication.

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