Asset Under Management Rose by 17% YoY in May to N10.8trn


Tuesday, July 28, 2020 / 09:12 AM / By FBNQuest Research / Header Image Credit: FBNQuest


We see from Pencom's latest report that the assets under management (AUM) of the regulated pension industry in Nigeria rose by 17.0% y/y in May to N10.80trn (US$27.9bn). The share of domestic equities in AUM peaked at 16% in 2007, ie before the blowout on the NSE, and has since fallen below 5%. The asset mix is skewed towards government debt. In contrast, the Retirement Benefits Authority in Kenya shows a more diversified industry: 39.4% of AUM in government securities, 19.7% in immovable property and 17.3% in quoted equities at end-2018.


The PFAs' holdings of FGN paper stood at 66.7% of AUM in May, little changed on the month. They were principally positions in FGN bonds (55.4% of the total). The dramatic story to tell, however, has been the fall in the share of NTBs by 36bps m/m and by 1,101bps y/y.


This followed the crashing of yields on NTBs following CBN circulars in October that halted the access of domestic non-bank players (notably the PFAs) to its open market operations. Fund managers initially favoured the NTBs as alternative investments until the yields buckled.


The question becomes whether, now that the PFAs have increased their bid for FGN bonds, those yields go further the same way and, if so, how the fund managers respond.


AUM of PFAs, Apr 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-May was N926,000, compared with N811,000 one year earlier. The latest report from Pencom also shows that just N25m was invested in those funds dedicated to the new micro pensions for the informal sector and firms with less than three employees out of a total of N8.35trn for RSAs. We hope that the selling of these new products gathers momentum for the sake of the industry and in order to expand the tax net in Nigeria.

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