Chimara BygoldNEW report on pension fund assets by National Pension Commission (NPC) shows that third quarter (Q3) investments in Local Money Market Securities (LMMS) have more pension fund assets in banks through Open Market Operations and banks’ fixed deposits than in commercial papers.
Total invested fund placed with banks as a percentage of total pension fund assets stood at 17.10 per cent or N2.22 trillion in September 2021, rising from 13.15per cent N1.66 trillion in June 2020 while investment in commercial papers, constituting 0.52per cent of investment in pension fund assets, decreased to N0.68 trillion from N0.72 trillion (constituting 0.57%).
According to the report, for corporate debts securities, the amount invested in this space increased by 1.82 per cent to N0.97 trillion in Q3 2021 from N0.95 trillion in Q2 2021. Albeit its proportion to the total pension fund assets fell marginally to 7.45per cent from 7.51per cent.
Similarly, Cash and Other Assets which constituted 0.46per cent or N59.79 billion of the total pension fund assets in September 2021 fell from 0.59per cent or N74.12 billion in June 2021.
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Funds invested in Real Estate Properties as a fraction of the total pension fund assets decreased to 1.18per cent or N153.44 billion from 1.24per cent or N156.88 billion in the period under review.
Cowry Research analysts note that the increased investment by Pension Fund Administrators ( PFAs) in Bank Placements was essentially to take advantage of relatively high yields in the short-term without much exposure to the risk inherent in the money market. ”
Also, the pension managers’ increased activities in the equities market in Q3 2021, which was in line with our expectations, was on the back of improved performance by corporates as the Nigerian economy recovers from COVID-19 pandemic.
“Going forward, specifically in Q4 2021 and Q1 2022, we expect pension managers’ to stay invested in bank placement, equities market and renew their interest in T-bills,” the analysts stated. Meanwhile, net value of pension assets rose by 2.72per cent to hit N13.00 trillion in Q3 2021 from N12.66 trillion in June 2021. According to the report, higher proportion of the pension fund assets were still invested in FGN securities despite the significant decline in T-bills investments.
Hence, the share of FGN bonds to total assets decreased to 60.25per cent (or N7.83 trillion) in the period under review, from 61.74per cent (or N7.81 trillion) it printed in June 2021. However, Pencom observed that PFAs’ investments in T-bills declined sharply quarter on quarter (q-o-q) by 48.21per cent to N283.88 billion in Q3 2021 from N548.13 billion recorded in June 2021 amid profit-taking activity. Bonds were relatively low as their respective shares of allocated pension assets stood at N79.78 billion and N11.99 billion in the month under review, falling from N86.09 billion and N12.88 billion respectively in June 2021, the report showed.
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