Operators in the Nigerian pension industry space have advocated the need for regulatory guidelines that would enable them to invest in export-orientated businesses, toll roads, real estate and high-growth unlisted companies in other to improve their performances and contributions to the nation’s Gross Domestic Product (GDP) growth.
A news report from Bloomberg on Thursday indicated the operators’ call came as high inflation and currency depreciation continued to depreciate the value of savings for the contributors to the nation’s Contributory Pension Scheme (CPS).
The latest data published by the National Pension Commission (PenCom) showed that as of the end of June this year, the pension funds had increased to N24.63 trillion, with the largest chunk of the fund being invested in government-backed debt instruments.
Bloomberg quoted the Chief Executive Officer of the Pension Fund Operators Association of Nigeria (PFOAN), Oguche Agudah, as saying that “pension funds operators are looking toward alternative investments to be able to cover any potential losses.”
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Also, the Chief Executive Officer (CEO) of Access ARM Pensions, Dave Uduanu, spoke on some of the potential alternative asset classes the fund could be deployed as including export-orientated businesses, toll roads, real estate and high-growth unlisted companies.
This is even as the Stanbic IBTC Pension Managers Ltd’s CEO, Olumide Oyetan, was also quoted as saying that the pension fund industry operators are also urging the authorities to issue floating-rate bonds that are indexed to the inflation rate, indicating that the availability of the securities in order to help operators maximise the value of their fixed-income portfolios, currently representing the largest portion of their balance sheets, and help them guard against negative real returns.
The Stanbic IBTC Pension and Access ARM Pension’s CEOs also reportedly disclosed that they had already been growing their investments in private equity, infrastructure funds and real estate investment trusts within the current rules.
It would be recalled that at a recent sensitisation workshop on investment in alternative assets held in Lagos for chairpersons of the Board Investment Strategy and Risk Management Committees of PFAs, the PenCom charged the PFAs to diversify their investment portfolios by increasing allocations to alternative assets in a bid to enhance returns and ensure long-term sustainability.
In her speech at the forum, the commission’s Director-General, Omolola Oloworaran, stressed that the current macroeconomic environment, characterized by high inflation, foreign exchange (FX) volatility, and declining purchasing power, required that operators adopt dynamic and resilient investment strategies in order to brace the odds and improve their returns on investments.
She said: “In this context, alternative assets provide a complementary pillar to the core investment strategies of pension funds. Investments in infrastructure and private equity, in particular, help align pension fund portfolios with their investment horizon, provide opportunities for diversification, and enhance risk-adjusted returns.”
The current clamour by the PFAs and the regulatory commission for alternative investments of the pension fund aligns with emerging trend, with the private credit in the pension currently totalling about $1.5 trillion market globally.
