Pensions Industry Asset Under Management Increased by 20.3% YoY to N12.29trn in December 2020

Wednesday, February 24, 2021 / 9:34 AM/ By FBNQuest Research / Header Image Credit: Getty Images

We see from PenCom data that the assets undermanagement (AUM) of the regulated pension industry increased by 20.3% y/y toNGN12.29trn (USD30.0bn) at end-December, and were flat m/m. The asset mixremains heavily concentrated in FGN securities, which accounted for 66.2% ofthe total. Pencom's Kenyan counterpart, the Retirement Benefits Authority,shows total AUM of KES1.32trn (USD12.4bn) at June '20: there was sizeableexposure to immovable property (18.6%) and listed equities (14.2%) alongsidethe largest share in government securities (44.0%).

Fund managers in Nigeria will have their reasons forpaying limited attention to assets such as real estate, private equity andinfrastructure funds. The corporate debt market has grown in recent months froma small base with some high-profile new issues. Holdings rose by 47.4% y/y toNGN836bn in December.

The holdings of FGN paper are predominantly the bonds,which represented 55.6% of total AUM. Over 12 months the share of NTBs hascollapsed from 18.4% to 5.1% as the returns have tanked. The initial triggerwas the CBN circular of October 2019 that excluded domestic nonbank players(notably the PFAs) from the market in its OMO bills.

The yields on the FGN bonds have risen by about fourpercentage points in mid-curve since the start of the year. That said, they arestill well under water when we allow for headline inflation running over 16%y/y.

The share of domestic equities rose from 5.4% to 7.0%over the twelve months, and members' holdings by 55.2% to NGN858bn. Over theperiod the all-share index increased by 50.0%, which offers some limitedevidence for the theory that the surge on the stock market in Q4 '20 was drivenby changes in asset allocation by domestic investors.

We should remember too that retail players account formore than 40% of domestic investor transactions on the NSE. Domestic institutionsother than the PFAs may well have also made similar shifts in their assetallocation.

The average value of a retirement savings account(RSA) at end-December was NGN1.02m, unchanged from the previous month.

Just NGN81m was invested at end-December in the newestRSA fund (no V), which has been created for micro pensions. The fund has beenin operation since January '20 and could become a game changer if the industryfinds the best marketing strategy.

AUM of PFAs, Dec 2020 (% shares) Total: NGN12.29trn

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