Business
PFAs Invest N1.3trn Pension Funds In Govt’s Securities
Pension Fund Administrators (PFAs) in the country had, as of the second quarter of 2012, invested N1.36 trillion of the increasing pension funds in Federal Government’s securities.
Figures from the latest financial report of the National Pension Commission (PenCom) obtained by The Tide source on Wednesday revealed that investment in FGN securities increased from N1.12 trillion in the first quarter to N1.3 trillion in second quarter of 2012.
“Investment in FGN securities increased by N200.66 billion, representing an increase of 13.14 per cent over the figure recorded in the first quarter,” the report stated.
PenCom said the performance could be explained by increased investors’ confidence and safety of assets as well as strategic moves of the PFAs as they divested part of their investment portfolio away from equities due to volatilities in the capital market.
The commission said the growth in FGN securities was largely attributable to increased investments in treasury bills, which had relatively high average yields of 16 per cent during the quarter.
PenCom’s report revealed that pension funds were heavily invested in the five, seven, and 10-year FGN bonds, which had yields of 15.85, 16.00, and 16.21 per cent, respectively as at the end of the second quarter.
For similar reasons, it added that investment in state government bonds increased by four per cent in the second quarter from N104.12 billion in the first quarter to N109.24 billion.
PenCom recently reviewed the investment guidelines for the management of pension funds in the custody of the PFAs.
Major highlights of the new guidelines are the consent for pension operators to invest the assets in Exchange Traded Funds; introduction of guidelines for global depository receipt, notes and eurobonds; and maximum restriction of transactions done by PFAs with related parties such as stockbrokers to 30 per cent.
The new multi-fund structure was incorporated into the amended regulation in the first quarter of 2013.
According to PenCom, this is to provide ample time for the commencement of a public education or campaign on the new structure by the commission and licensed pension funds operators.
The Pension Fund Custodians (PFCs) are mandated to only take instructions from the PFAs on the investment, as they must not contract out the custody of pension fund assets to third parties, except for allowable investments made outside Nigeria.
In the aspect of foreign investment, the PFCs are to obtain prior approval from PenCom before engaging a global custodian for such allowable foreign investments.
Section 3.3 of the new investment guidelines states, “All primary market investments by PFAs in units of open, close-end, hybrid investment funds, including ETFs, and specialist investment funds (REITs, infrastructure fund and private equity fund), shall be through public offering or private placement arrangement.”
It adds that all secondary market trading of pension assets shall take place in a securities exchange (local and offshore) recognised by the Securities and Exchange Commission or a trading facility recognised by the Central Bank of Nigeria.
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