Pension funds are considered as institutional investors in the stock market. This is because they invest huge amounts of their funds in stocks. This therefore means that as a pension contributor with a RSA, your pension contributions have been invested in stocks of various types on your behalf by your PFA.
Why you should be interested?
The PFAs are allowed to invest in variable income instruments such as equities by as high as 75% and as low as 5% of total portfolio value. As at February 2020 for instance, a total of N532.45bn was invested in ordinary shares while about N38.41bn was invested in Private Equity funds and N19.31bn in open/close-end funds or mutual funds. This in total represents about 5.62% of the total pension assets.
You should be interested in the stock market as a pension contributor because the performance of the stock market directly affects the balance in your pension fund because a large amount of the pension assets are invested in equities. So, when the stock market performance is good, you will likely see an improvement in your RSA balance. Also, when the performance is very bad, your RSA balance will likely go south.
In conclusion, even though you haven’t directly bought shares in the stock market through a stock broker on your own account, remember that you are a participant and a stakeholder in the stock market via your pension fund, therefore the performance of the stock market should be of interest to you.
To know how the stock exchange is performing, you can check out the Nigerian Stock Exchange website at www.nse.com.ng. Also, in the coming periods, we at PensionTalk will be bringing to you updates in the Nigerian stock exchange. Please stay tuned.