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Alternative investments solution to declining returns on pension funds – PenOp

Following the declining return on investments, the Pension Fund Operators Association of Nigeria (PenOp) on Tuesday said it was seeking investment alternatives besides government bonds and treasury bills to increase returns on investment on pension assets.

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Oguche Agudah, Chief Executive Officer of PenOp, disclosed this to the News Agency of Nigeria (NAN) on the sidelines of a virtual training for members of the National Association of Insurance and Pension Correspondents in Lagos.

Mr Agudah spoke in reaction to a decline of pension assets by N51.30 billion in February. He attributed the decline in pension fund assets of N51.30 billion mainly to the depreciation in the prices of fixed income securities.

The PenOp CEO, however, explained that the loss in percentage is minimal when subtracted from the N12.29 trillion total pension asset.

“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.”

He further explained that “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.

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“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,” he noted.

In addition, Amaka Andy-Azike, PenOp spokesperson, explained that the decline in the pension funds was unrealised losses according to the terms of the equity market.

Mrs Andy-Azike stated that following the developments, pension funds operators were sourcing for other means to increase yields.

She noted that pension operators were more focused on the safety of funds when investing even as they try to also give fair returns on investments.

She, however, noted yields have started to increase, a development that portends positive growth in the near future.

She noted that “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,” she said.

Source: NAN

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