The Pension Fund Administrators (PFAs) have increased their investments in Federal Government of Nigeria securities by 3.7% to N8.14 trillion in November 2020.

This is according to recent data from the National Pension Commission (PenCom), which revealed that the amount invested by PFAs on FGN securities including; Bonds, Treasury Bills, etc., increased from N7.85 trillion as of October 2020 to N8.14 trillion by the end of November 2020.

Key highlights

The breakdown of the amount invested on various FGN securities within the period under review are:

• FGN Bonds got the lion’s share of N7.38 trillion as of November 2020, accounting for 90.7% of the total amount invested in FGN securities for the aforementioned month. This indicates a growth of 4.3% Month-on-Month.
• Investment in Sukuk bond increased to N100.07 billion in November 2020, up by +6.9% Month-on-Month.
• Investment in Treasury Bills declined to N642.03 billion, down by -1.7% Month-on-Month.
• Investment in Agency bonds also declined to N6.03 billion, down by 50.9% Month-on-Month.
• Investment in green bonds declined to N11.8 billion, down by 10.6% Month-on-Month.
• Investment in state government securities stood at N150.59 billion, down by 2.5% Month-on-Month.

Read Also: Pension Fund Assets hits N9.3 trillion as investment in FGN securities drops

Upshots: The increased investment in FGN securities by PFAs within the aforementioned period might be attributable to an earlier order by CBN which prohibited PFAs from OMO Auctions. The order redirected the investment focus of most PFAs, with many opting for other low-risk FGN securities, possibly explaining why the increase occurred.

What you should know: Nairametrics had earlier reported that CBN had restricted OMO auctions to banks and foreign investors.

• The Net asset value of all PFAs in the country as of November 2020 stood at N12.3 trillion, marginally up by +1.98% Month-on-Month.
• Total RSA registration for the aforementioned period also increased by 0.17% to 9,188,475.

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.

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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.

READ: FG posts 27% revenue shortfall in 2020 as budget deficit hit N6.1 trillion

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%

READ: Pension Fund Assets hits N9.3 trillion as investment in FGN securities drops

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.

READ: Worry for PFAs as pandemic-induced unemployment lowers new pension accounts

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.

READ: Nigeria’s Eurobond yield hit 12.8% as investors flee emerging markets

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.

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.

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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%.

READ: Stanbic IBTC Pension Managers reveals breakdown of its massive N2.53 trillion AUM.

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%.

READ: Premium Pensions RSA Fund tops Nigerian RSA funds with 7.55% return

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.

READ: PFAs earn N1.69 trillion as ROI

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%

READ: What to expect from Nigeria’s capital market in 2021

The chart below shows all PFAs based on the average returns on Investment for each PFA for January to December.

Source: computed from Pension Nigeria data.

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.

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