Low yield on fixed-income securities such as Treasury Bills at around 1-2% plus rising inflation currently at 13.71% are threat to the real growth of pension funds assets in the near to medium term, the Director General, Lagos Chambers of Commerce and Industry (LCCI), Dr. Muda Yusuf, has revealed.
Dr. Yusuf made the revelation while delivering the keynote lecture at the 2020 annual national conference of the National Association of Insurance and Pension Correspondents (NAIPCO) on the theme “Promoting Bankable Investments Portfolio for Insurance and Pension Sectors,” In Lagos recently.
The LCCI boss who is advocating for the de-risking of the real sector, to attract more investment opportunities, stated that given their low risk nature, a large chunk of pension funds assets are invested in Federal Government Securities, majorly Federal Government Bonds.
According to him, this is so because Pencom guidelines, PFAs are mandated to invest pension funds in low-risk securities, adding that fund managers have little exposure to volatile investment vehicles and that six percent of pension funds assets are locked in equities.
Fund managers’ exposure to investment vehicles in the real sector, he said, is extremely low due to the high level of risk involved explaining that just 2% of pension assets is invested in real estate, and less than 1% in infrastructure fund. because fund managers often complain that projects in the real economy are non-bankable.
On insurance industry investment portfolio, he said there is need to maintain a balance between liquidity and returns on investment on bank placements, Treasury Bills, Commercial papers, Bonds, Equities and Real Estate.
On the trend in Nigerian pension fund assets, Dr. Yusuf said person fund assets have been on the upward trajectory in the last three years with assets under Management rosing by 42.9% from N7.94 trillion as of March 2018 to N11.35 trillion as of August 2020.
This year (2020), according to him, pension funds assets have appreciated by 8.8% to N11.35 trillion by end-August 2020 from N10.43 trillion by end-January 2020 amid very low return rates on government securities.
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