November 15, 2019 / 10:09 AM / By FBNQuest Research/ Header Image Credit: Texas Comptroller
The assets under management (AUM) of the regulated pension industry increased by 14.8% y/y in September to N9.58trn (US$31.2bn), and by 1.5% m/m. They represent just 7.5% of 2018 GDP. This coverage lags peer emerging markets because the Nigerian industry, dating from 2004, is one of the newest.
The latest figure for Kenya is 14.0% in December 2018, and its asset structure is diverse: 39.4% of the total in government paper, 19.7% in real estate and 17.3% in listed equities. The focus of Nigerian PFAs is concentrated on FI products.
Their holdings of FGN paper totaled 70.3% of AUM in September, compared with 69.8% one year earlier. This masks, however, a clear shift in their exposure to NTBs, the share of which rose from 18.0% to 23.6% of the total in the period.
More recently, the CBN has restricted domestic access to its open market operations (OMOs) to the banks. The exclusion of non-bank participants such as the PFAs should become visible in coming monthly reports from Pencom.
The PFAs are core participants at the monthly auctions held by the Debt Management Office. Their holdings of FGN bonds at end-September represented 46.2% of the stock of the instruments at end-June.
At the last two auctions both sales and the total bid have been strongest for the 10-year benchmark rather than the long bond, which is seen as the favourite of the PFAs for matching purposes.
AUM of PFAs, Sep 2019 (% shares)
Sources: National Pension Commission (PenCom); FBNQuest Capital Research
The proportion of AUM invested in domestic equities has declined over the past 12 months from 7.2% to 5.1%. By way of providing colour, we note that the NSEASI fell by 15.7% over the same period. That said, the m/m increase in the share of equities from 4.9% in August to 5.1% was the first in months.