A freshly released report on pension fund assets by the National Pension Commission (NPC) has shown that pension administrators are investing heavily in Federal Government of Nigeria (FGN) bonds.
Hence, most of the pension fund assets were invested in FGN bonds and the share of such bonds to total assets has climbed to 60.31 per cent (or N7.78 trillion) in August 2021, from a 60.01per cent (or N7.38 trillion) it printed in December 2020 according to the report.
However, Pension Fund Administrators’ (PFAs) investments in T-bills declined sharply year to date (YTD) by 34.61 per cent to N410.81 billion as at August 2021 from N628.22 billion recorded in December 2020 despite the improvement in treasury bills yields within the eight months of the year.
According to the report, T-bills rate rocketed to 6.8 per cent at the end of August from 0.3 per cent it printed in December 2020, even as it showed that that the total value of pension assets for the first eight months of the year rose by 4.83 per cent to N12.90 trillion in August 2021.
“Given the reduction in the weight of FGN securities to the total assets (it fell to 64.27 per cent in August 2021 from 66.07 per cent in December 2020) as money flow to T-bills dropped, we saw PFAs investment preference drift towards Local Money Market Securities (LMMS) as total funds invested in this investment category rose by 25.84 per cent to N2.12 trillion in September 2021 (lifting its share of the total assets to 16.46 per cent), from N1.69 trillion in December 2020 (or 13.71 per cent of total assets),” dealers from Cowry Assets Management Limited stated.
Further breakdown of investment in LMMS in the report also showed that more pension fund assets were invested in Banks (which include Open Market Operations and DMBs fixed deposits) than in commercial papers.
Total invested fund placed with banks as a percentage of total pension fund assets stood at 15.49 per cent (or N1.99 trillion) in September 2021,
rising from 12.44 per cent (N1.53 trillion) in December 2020 while investment in commercial papers, constituting 0.97 per cent of investment in LMMS, decreased to N0.13 trillion from N0.16 trillion (constituting 1.27 per cent).
Similarly, “we saw cash and other assets which constituted 1.01 per cent (or N130 billion) of the total pension fund assets in August 2021 rise from 1.00 per cent (or N122.79 billion) in December 2020. Similarly, funds invested in real estate properties as a fraction of the total pension fund assets increased to 1.83 per cent (or N235.91 billion) from 1.30 per cent (or N159.70 billion) in the period under review.
Investments in Sukuk and Green Bonds were relatively low as their respective shares of allocated pension assets stood at N73.80 billion and N11.50 billion in the month under review, rising from N93.55 billion and N13.81 billion, respectively in December 2020.
Meanwhile, pension fund assets investment in the domestic equities market moderated to N0.85 trillion in August 2021 from N0.86 trillion in December 2020; thus, reducing the weight of total pension funds in local equities market marginally to 6.56 per cent from 6.98 per cent.
The equities market received lower “patronage” from “RSA FUND III” as its total invested funds reduced to N122.97 billion in August 2021, from N126.95 billion in December 2020, the report showed.