PFAs Position in FGN Bonds, Duck Treasury as Pension Assets Rise
Pension Fund Administrators (PFAs) position strongly in the Federal Government of Nigeria bonds market while assets managers avoid investment in Treasury bills space as pension assets rise near N13 trillion.
According to a new report on pension fund assets by National Pension Commission, 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.
Citing the report in a review, analysts at Cowry Asset Management Limited said most of the pension fund assets were invested in the Federal Government of Nigerian bonds.
Hence, the share of FGN bonds to total assets climbed to 60.31 per cent (or N7.78 trillion) in the period under review, from a 60.01 per cent (or N7.38 trillion) it printed in December 2020.
However, analysts spotted that PFAs’ investments in T-bills declined sharply year to date by 34.61 per cent to N410.81 billion as of August 2021 from N628.22 billion recorded in December 2020 despite the improvement in treasury bills yields within the eight months of the year.
The firm noted that the T-bills rate rocketed to 6.8 per cent at the end of August from 0.3 per cent it printed in December 2020.
Given the reduction in the weight of FGN Securities to the total assets which fell to 64.27 per cent in August 2021 from 66.07 per cent in December 2020 as money flow to T-bills dropped, analysts said they saw Pension Fund Administrators (PFAs) investment preference drift towards Local Money Market Securities.
This occurred 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.
Also, investment in local money market securities showed that more pension fund assets were invested in Banks -which include Open Market Operations and DMBs fixed deposits – than in commercial papers.
Analysts said total invested funds 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 or N1.53 trillion in December 2020.
Meanwhile, 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, analysts at Cowry Asset said they 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 invested 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 the 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.
In another development, the Central Bank of Nigeria finally launched its e-Naira on Monday, October 25, 2021 – making its two applications eNaira Speed Wallet and eNaira Merchant Wallet downloadable on the Google Play Store and Apple Store.
The President was more optimistic in his view that the launch of the eNaira would boost the country’s GDP to USD29 billion in the next 10 years as it boost remittances, improve financial inclusion, foster cross border trade.
“We note that the increased investment by PFAs in Bank Placements and FGN Bonds was essentially to take advantage of the relatively high yields in open market operations (OMO and bonds markets.
“Hence, we saw the demand pressure for T-bills spill over to the bonds market as CBN kept a focus on expansionary monetary policy aimed at stimulating economic growth”.
In this last quarter, Cowry Research expects pension managers to increase their activities in the equities market as they buy stocks with good dividend yields, especially for RSA FUND II and III. # PFAs Position in FGN Bonds, Duck Treasury as Pension Assets Rise
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