Allocation Quandary for the PFAs


Tuesday, February 04, 2020   /10:47 AM  / By FBNQuest Research / Header Image Credit:  FBNQuest Research


Data from the industry regulator tell us that the assets under management (AUM) of the regulated pension industry in Nigeria increased by 17.6% y/y in November to N9.99trn (US$27.5bn), and by 1.8% m/m. The share of equities in AUM peaked at 16% in 2007, ie before the blowout on the NSE.


In contrast, AUM in the peer industry in Kenya are far more diversely held: 39% in government paper, 20% in real estate, 17% in listed equities and 14% in guaranteed funds at end-2018 according to the Retirement Benefits Authority.


The PFAs' holdings of FGN paper amounted to 70.9% of AUM in November, compared with 72.5% one year earlier.


The trend to track going forward is the impact on allocation of the CBN circulars of late October that barred domestic non-bank players (notably the PFAs) from its open market operations (OMO). As their bills issued within OMO mature, fund managers obviously have to take investment decisions. Our rough calculations point to maturities of about N1trn this month.


Over the month of November, holdings of FGN bonds increased by N120bn and of equities by N60bn while those of NTBs declined by N120bn. Returns on NTBs started to fall sharply in November.


In this changing investment landscape, PFAs have several outlets for their maturing OMO bills, including: FGN bonds, evident from their bid at last week's auction; equities despite a far from compelling story; and the mooted giant infrastructure fund. Each has obvious flaws.


Proshare Nigeria Pvt. Ltd.

Unfortunately, the PenCom monthlies no longer show total registrations with the breakdown by age and sector. We cannot therefore track the success of the PFAs in selling the new micro-pensions.


Proshare Nigeria Pvt. Ltd.

Related News

  1. Concentration of Assets Under Management in FI Products
  2. Low RSA Balances; A Subtly Growing Concern
  3. Pension Fund Asset Under Management Stood At N9.58trn As At Q3 2019 - NBS
  4. Asset Under Management Increased By 14.8% YoY In September 2019 To N9.58trn
  5. The Discontinuation of DBA For Deceased Employees Under The Contributory Pension Scheme
  6. House Of Representatives Investigates Alleged Non-Remittance Of Contributions To NSITF
  7. What Does The Future Hold For The Nigerian Pension Industry?
  8. Pencom Releases Guidelines on Voluntary Contribution under the Contributory Pension Scheme
  9. 8.57m Workers Are Registered Under The Pension Scheme As At Q1 2019 - NBS
  10. Pension Industry In Need Of New Members; Asset Under Management Increased By 14.4% YoY in Feb 2019
  11. The Informal Sector to Benefit From The Contributory Pension Scheme
  12. 8.41m Workers Are Registered Under The Pension Scheme As At Q42018 - NBS
  13. Addressing The Mysteries Of Retirement Planning - Meristem


 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.


Related News