Little change in PFA asset allocation; Assets under management increased by 0.8% MoM in September 2021


Thursday, Nov 11, 2021 / 9:20 a.m. / By FBNQuest Research / Header image credit: FBNQuest

Our chart below, based on PenCom’s latest monthly report, shows the breakdown of assets under management (AUM) in the pension sector by asset class. We see from the data that AUM increased 0.8% m / m and 12.4% year-on-year to NGN13trn (USD31.3 billion) at the end of September. FGN debt securities fell by -0.8% m / m to represent 63% of the total. When we include corporate and government issues, fixed income exposure equals 71.4% of the sector’s assets under management at end-September. For Kenya, the Retirement Benefits Authority estimates the share of government securities at 44.1% at end-June 21 and listed equities at 16.9%.

For Nigerian pension funds, the share of domestic stocks increased slightly from 5.1% to 6.7% year-over-year, and members’ holdings increased 49% to NGN874bn. The All Equity Index (ASI) rose 50% over the same period, implying a slight shift from PFAs to national stocks.

Unlike their Kenyan counterparts whose share of real estate is 16.7%, Nigerian pension funds are less exposed to real estate and infrastructure funds. At the end of September, funds allocated to infrastructure, real estate and real estate investment companies (REITs) represented 2.4% (NGN313.7 billion) of the total. In its defense, PenCom revealed that the investment of pension assets in infrastructure development has been limited by the availability of eligible instruments in the financial market.

The exposure of the pension sector to NTBs continues to trend downward. The share of BNT fell by -63.6% year-on-year and -30.9% m / m to reach NGN 284 billion, or 2.2% of total assets under management. The corresponding figures in 2018, 2019 and 2020 were 18.0%, 23.6% and 6.7% respectively. We recall that NTB yields have fallen considerably as fund managers have directed the proceeds of their OMO bond maturities to the NTB space – a consequence of the CBN circulars prohibiting national non-bank players from its OMO auctions. in October ’19.

FGN bonds represented 60.3% of total assets under management at the end of September, compared to 57.4% the previous year by period / day. The huge need to finance the FGN’s NGN 5.6 billion deficit in the 2021 budget (ahead of the vote on the additional by the National Assembly) helped drive up yields. We do not see this trend changing anytime soon given the FGN’s proposed deficit for FY2022 of NGN 6.3 billion, of which NGN 2.51 billion has been set as the domestic borrowing target.

Last month, PenCom introduced an interest-free fund (Fund VI) that adheres to the principles of interest-free funding (Sharia).

AUM of PFA, September ’21 (% shares) Total: NGN13.0trn

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Sources: PenCom; Fundraising FBNQuest

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