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PFAs invest N525.5bn in shares

By on September 8, 2013

About N525.5bn of the total pension assets has so far been invested in the stock market, investigation has revealed.

According to figures made available to our correspondent on Friday by the National Pension Commission, the amount is just about 15 per cent of the entire pension funds, which a recent report put at N3.52tn at the end of June.

Out of the amount, N480.2bn, which is about 14 per cent of the pension assets, was invested in domestic ordinary shares; while only one per cent was invested in foreign ordinary shares.

Since the inauguration of the Contributory Pension Scheme in 2004, the amount contributed by workers has continued to increase and the Pension Funds Administrators invest the funds in different approved portfolios.

The largest portion of N1.47tn, which is about 42 per cent of the assets, was invested in the FGN bond; while N593.5bn or 17 per cent was invested in treasury bills, PenCom report stated.

It also indicated that the PFAs invested N408.5bn, N193.18bn, N169.7bn and N77bn in local money market securities, real estate properties, state government securities and corporate debt securities, which were about 12 per cent, five per cent, five per cent and two per cent, respectively.

The PFAs are the administrators of the pension assets while the Pension Fund Custodians are the custodians, according to the Pension Reform Act 2004.

The remaining assets were invested in supra-natural bonds, foreign money market securities, open/close-ends funds, private equity funds, cash and other assets.

In December last year, PenCom reviewed the investment guidelines for PFAs and PFCs for effective management of pension funds in their custody.

The Chairman, Pension Fund Operators Association of Nigeria, Mr. Dave Uduanu, said the pension assets were safe and effectively managed by the PFAs.

According to him, the growing funds are not left idle, adding that are regulatory guidelines to monitor the investment of the money.

Uduanu said that the PFAs were allowed to invest the funds in any safe quality instrument found available.

“We do investment in equities; we do bonds; we are allowed to do private equities, infrastructure assets and real estates,” Uduanu said.

However, he added that PFAs were not investment banks or charity institutions, but were buyers of securities and investment instruments, which meant that they must be prudent with their investment.

The PeNop boss noted that the assets were not there to provide mandatory infrastructure as that was the duty of the government.

For this reason, he said, the PFAs only considered investments that could yield returns so that when the pensioners retired, they could always get their money with ease.

The Chief Executive Officer, Riskgaurd Pension and Insurance Consultant, Mr. Yemi Soladoye, said the initial investment guideline introduced when the CPS started was quit narrow as it did not take care of certain relevant issues.

This, he added, was now changing as the operators were seeing the need to consider not only the safety of the funds but the yield and diversification.

“Pension funds are long term funds people contribute for years. Such funds are usually directed to projects of national development, especially the provision of infrastructure, but the original investment guideline was quite narrow and too restrictive to look at such areas,” Soladoye said.