Changing Landscape for the PFAs, AUM Rose by 20.2% to N11.35trn in August 2020


Wednesday, October 21, 2020 / 10:14 AM / By FBNQuest Research / Header Image Credit: FBNQuest 

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Assets under management (AUM) of the regulated pension industry in Nigeria rose by 20.2% y/y in August to N11.35trn (US$29.4bn), and by 0.4% m/m. The monthly reports from the regulator (PenCom) show an asset mix heavily skewed towards FGN debt securities, which represented 66.3% of the total. In contrast, its Kenyan counterpart, the Retirement Benefits Authority, puts the share of government securities at 39.4% at end-2018. It also shows immovable property and listed equities at 19.7% and 17.3% respectively: the current Nigerian equivalents are 1.9% and 4.8%.


The PFAs' holdings of FGN paper are principally bonds (56.3% of total AUM). The headline to share, however, has been the meteoric fall in the share of NTBs by 1,446bps y/y as a result of the crashing of yields in Q4 2019.


The fall in holdings of NTBs has been balanced by higher exposure to FGN bonds and local money market instruments. In turn, however, the FGN bond returns have now fallen sharply. Yields for long bonds are lower than those for the FGN's Eurobonds of similar tenor, as well as being about half the rate of underlying headline inflation. Decision time would appear to be fast approaching for the PFAs although the long bonds are attractive for matching purposes.


Some may be tempted by the dividend yields offered by a small number of listed equities. Others may have to revisit their thinking on existing products such as private equity funds. All will be hoping for new investment alternatives approved by the regulator.


AUM of PFAs, Aug 2020 (% shares)


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Sources: National Pension Commission (Pencom); FBNQuest Capital Research



The average value of a retirement savings account (RSA) at end-August was N963,000, compared with N959,000 in July. The latest report from Pencom also shows that just N44m was invested in RSA fund V dedicated to the new micro pensions for the informal sector and small firms.

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