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Finance | Pensions n Retirement

Asset Under Management Increased by 23% YoY to N12.29trn in November 2020

Jan 21, 2021   •   by   •   Source: Proshare   •   eye-icon 1544 views

Thursday,January 21, 2021  / 08:50 AM  / By FBNQuest Research /Header Image Credit: iStock


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Datafrom the regulator tell us that assets under management (AUM) of the pensionindustry increased by 23.0% y/y to NGN12.29trn (USD31.3bn) in November, and by2.0% m/m. The asset mix remains heavily concentrated in FGN securities, whichaccounted for 66.2% of the total. Pencom's Kenyan counterpart, the RetirementBenefits Authority, shows total AUM of KES1.32trn (USD12.4bn) at June '20:there was sizeable exposure to immovable property (18.6%) and listed equities(14.2%) alongside the largest share in government securities (44.0%). Fundmanagers in Nigeria will have their reasons for paying limited attention toassets such as real estate, private equity and infrastructure funds.

 

Thecorporate debt market is relatively small although it has grown in recentmonths with some high-profile new issues. Holdings rose by 14.9% y/y toNGN687bn in November.

 

The holdings of FGN paper arepredominantly the bonds, which represented 60.0% of total AUM. Over 12 monthsthe share of NTBs has collapsed from 21.2% to 5.2% as the returns have tanked.The indirect trigger was the CBN circular in October '19 that shut the PFAs andother domestic nonbank players out of the market in its OMO bills.

 

The returns on the FGN bonds are wellunder water when we allow for headline inflation running close to 16% y/y.

 

The share of domestic equities pickedup from 5.4% to 6.4% over the twelve months, or by 47.6% to NGN791bn inholdings. Over the period the all-share index increased by just 29.8% so wehave some evidence for the theory that the surge on the stock market in Q4 '20was driven in part by changes in asset allocation by domestic investors.

 

We should remember too that retailplayers account for more than 40% of domestic investor transactions. We thinkthat this shift in allocation by the PFAs will be evident (and stronger) whenthe Pencom report for December is available.

 

The average value of a retirementsavings account (RSA) at end-November was NGN1.02m, compared with NGN963,000three months earlier.

 

Just NGN71m was invested atend-November in the newest RSA fund (no V), which has been created for themicro pensions of the informal sector and SMEs. The fund has been in operationsince January '20 and could be transformative if the industry finds the bestmarketing strategy.

    

AUM of PFAs, Nov 2020 (% shares)

Proshare Nigeria Pvt. Ltd.

Sources: National Pension Commission (PenCom); FBNQuest Capital Research


Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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