Freshly released report on pension fund assets by National Pension Commission (NPC) showed that the net value of pension assets rose by 2.72% to hit N13.00 trillion in 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, share of FGN bonds to
total assets decreased to 60.25% (or N7.83
trillion) in the period under review, from 61.74% (or N7.81 trillion) it printed in June 2021.
However, PFAs’ investments in T-bills declined sharply quarter on quarter (q-o-q) by 48.21% to N283.88 billion in Q3 2021 from N548.13 billion recorded in June 2021 amid profit taking activity – treasury bills rate for 364-day moderated to 7.5% at the end of September 2021 from 9.15% it printed in June 2021.
Given the reduction in the share of FGN Securities in the total assets (it fell to 63.25% in Q3 2021 from 66.96% in June 2021) as money moved out of T-bills securities, we saw Pension Fund Administrators (PFAs) investment preference drift towards Local Money Market Securities (LMMS).
Hence, total funds invested in this investment category rose by 31.89% to N2.29 trillion in September 2021 (lifting its share of the total assets to 17.62%), from N1.74 trillion in June 2021 (or 13.72% of total assets).
Also, investment in LMMS 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 17.10% (or N2.22 trillion) in September 2021, rising from 13.15% (N1.66 trillion) in June 2020 while investment in commercial papers, constituting 0.52% of investment in pension fund assets, decreased to N0.68 trillion from N0.72 trillion (constituting 0.57%).
For corporates debts securities, the amount invested in this space increased by 1.82% 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% from 7.51%.
Similarly, Cash and Other Assets which constituted 0.46% (or N59.79 billion) of the total pension fund assets in September 2021 fell from 0.59% (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% (or N153.44 billion) from 1.24% (or N156.88 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 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.
Meanwhile, pension fund assets investment in the domestic equities market rose to N873.49 billion in Q3 2021 from N843.19 billion in Q2 2021; thus, increasing the weight of total pension funds in local equities market marginally to 6.72% from 6.66%.
The equities market received better “patronage” from “RSA FUND II” and “RSA FUND III” as their total invested funds increased to N593.37 billion and N125.87 billion respectively in September 2021, from N570.89 billion and N122.41 billion respectively in June 2021.
Cowry Research notes that the increased investment by PFAs in Bank Placements was essentially to take advantage of a 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 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.