A Newly released report on pension fund assets by the National Pension Commission (NPC) has shown that the investment in Local Money Market Securities (LMMS) had more pension fund assets invested in banks through Open Market Operations and banks’ fixed deposits than in commercial papers in the third quarter (Q3).
It further showed that 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 13.15 per cent N1.66 trillion in June 2020, while investment in commercial papers, constituting 0.52 per cent of investment in pension fund assets, decreased to N0.68 trillion from N0.72 trillion (constituting 0.57 per cent).
According to the report, for corporates 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 7.45 per cent from 7.51 per cent.
Similarly, cash and other assets which constituted 0.46 per cent or N59.79 billion of the total pension fund assets in September 2021 fell from 0.59 per cent or N74.12 billion in June 2021.
Funds invested in real estate properties as a fraction of the total pension fund assets decreased to 1.18 per cent or N153.44 billion from 1.24 per 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, the net value of pension assets rose by 2.72 per cent to hit N13.00 trillion in Q3 2021 from N12.66 trillion in June 2021.
According to the report, a 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 60.25 per cent (or N7.83 trillion) in the period under review, from 61.74 per 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 48.21 per 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.