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Pension Managers flee from the stock market

By on July 12, 2012

If the perception of pension managers about the stock market is anything to go by, then the prices of shares may continue to decline following the diversion of pension assets to Federal Government securities.

Pension assets, which before the capital market bubble burst accounted for a sizeable portion of total pension assets has continued to decline after many investors got their fingers burnt. Between 2011 and May 2012, Pension Fund Administrators (PFAs) reduced their assets in both foreign and local ordinary shares from 10.7 per cent of total investments in stocks to 8.5 per cent.

But during the same period, the PFAs increased their investments to 65 per cent of total investments in FGN securities in May 2012 from 61.6 per cent in 2011.

The story was the same as the pension managers reduced their stakes in the troubled real estate sector to new found haven in FGN securities, corporate debt securities and others. Investment in real estate properties fell from 1.2 per cent to 0.9 per cent.

Bismarck Rewane, Chief Executive Officer of Financial Derivatives Limited, said history is not on our side and the trend is likely going to be better in the second half in the stock market.

He said liquidity remains an issue with total volume and value traded for the first half of the year 2012 put at 50.6 billion units and N347 billion respectively.

“The index has generally performed badly in the second half of the year. Average first half return between 1986 and 2011 is 16.9 percent while average second half return is 7.5 percent. Between 2008 and 2011, market gained 1.15 per cent in the first half of the year while second half return was -21.4 per cent”, said Rewane in his July Lagos Business School (LBS) breakfast meeting report.

The PFAs equally divested a little from the local and foreign money markets securities. Their investments fell from 14.9 per cent to 14.1 per cent. Also, its assets in state debt securities fell from 6.9 per cent to 6.5 per cent.

But its assets in corporate debt securities rose from 2.4 per cent to 2.6 per cent, while investments in open/close-end funds remained at 0.9 percent, and what Rewane termed cash and other assets rose from 1.4 percent 1.5 per cent during the same period.