Allocation Quandary for the PFAs

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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.


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 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

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