Pension Operators Seek Alternative Investments As Assets Decline

The Pension Fund Operators Association of Nigeria has said it is seeking other alternative investment options aside from the government bonds and treasury bills to increase returns on investment.

The Chief Executive Officer, PenOp, Oguche Agudah, said this during a virtual training organised by a reporters’ association.

He attributed the recent decline in pension fund assets to the depreciation in the prices of fixed income securities in the trading portfolios of the Approved Existing Schemes, RSA Funds II and IV and Closed Pension Fund Administrators.

According to him, the loss in percentage was minimal when subtracted from the N12.29tn pension asset.

The Contributory Pension Scheme lost N52bn in February after it had earlier lost N7bn in January, according to the National Pension Commission.

Agudah said, “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.”

The Head of Media, Communications and Branding Committee, PenOp, Amaka Andy-Azike, explained that the decline in the pension funds was due to unrealised losses according to the terms of the equity market but pension funds operators were sourcing for other means to increase the yields.

She said, “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 two per cent but now some banks are offering 10 per cent.

“Indeed, the prices of bonds also declined; it was trending for six per cent in some areas for long-term and four per cent for short to medium term but today, yields on bonds have started trending upwards.”

She noted that most of the losses in the equity market were not actual losses, but were unrealised losses because when the equity market goes up again, the yields would rebound and would become more.