N51.30bn pension funds decline: ‘We are diversifying to increase yields’- PenOp
By Ngozi Onyeakusi—- As part of efforts to grow the pension funds asset which suffered a N51.30 billion decline in February, the Pension Fund Operators Association of Nigeria (PenOp), has said it is eyeing other alternative investment options aside from the government bonds and treasury bills to increase returns on investment.
The CEO of PenOp, Oguche Agudah, said this recently at a virtual training organized by PenOp for members of the National Association of Insurance and Pension Correspondents (NAIPCO).
Agudah who noted that the pension fund assets decline of N51.30 billion in February was mainly attributed to the depreciation in the prices of Fixed Income Securities (FISs) in the trading portfolios of the Approved Existing Schemes (AES), RSA Funds II and IV and Closed Pension Fund Administrators (CPFA), explained that the loss in percentage is minimal when subtracted from the N12.29 trillion pension asset.
He said, “If you examine the N51.30 billion depreciation from the N12.29 trillion pension funds in January 2021, you will notice it is not even up to 0.01 per cent, so the percentage loss here is minimal.
“However, we know there are concerns about the decline in the pension value of assets and the honest truth is that pension funds need to invest more in other assets classes outside of the government bonds and treasury bills which are the safest. So, safety is the first option adopted when investing in any asset.
“Currently pension funds cannot invest in foreign bills because there are regulations which need to be approved by the government. However, we are looking out for other various outlets and areas where the funds can be invested; areas like private equity, but the honest truth is that we need to balance between safety and returns. Notwithstanding, the industry is looking at other alternative investment instruments”, Agudah maintained.
For her part, the Head of Media, Communications and Branding Committee, PenOp, Amaka Andy-Azike, explained that the decline in the pension funds are unrealized losses according to the terms of the equity market but pension funds operators are sourcing for other means to increase the yields.
“As operators, we focus more on the safety of funds when investing even as we try to also give fair returns on your investments. The decline in pension funds was because of the market volatility; the money market, bonds and treasury bills have been fluctuating due to the nature of what the economy experienced last year and is still going through.
“Fortunately, as we speak, the yields have increased greatly. Before now, for instance, our money market yield was like 0.5 to 2 per cent but now some banks are offering 10 per cent.
“Indeed, the prices of bonds also decline; it was trending for 6 per cent in some areas for long-term and 4 per cent for short to medium term but today, yields on bonds have started trending upwards. So, if you do a revaluation of the previous loss on pension funds, you will discover that it is not up to the N51 billion.
“Also, it is worthy to note that in the equity market most of these losses are not actual losses, they are unrealized losses because when the equity market goes up again, these yields will rebound and you will get much more. So, some of these losses are not realized losses and some have been corrected because there is increase in yield now in all our instruments; and we are currently looking out for other platforms that are safe to invest the funds. So, for us, the safety of your funds come first in all investment we partake”.
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