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Home Pension

Pension Operators Say CPS Has Multi-System Hedge Against Assets Decline

Nwanne Ikemefune by Nwanne Ikemefune
May 5, 2021
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Pension Operators Say CPS Has Multi-System Hedge Against Assets Decline
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The Pension Fund Operators Association of Nigeria (PenOp), said it has put its members on notice to have own suitable measures to avert adverse effects of decline in investment returns reoccurring by considering all options approved as alternative investments destinations aside from the government bonds and treasury bills to increase returns on investment.

The CEO of PenOp, Oguche Agudah, said this recently at a virtual training organized by PenOp for members of the National Association of Insurance and Pension Correspondents (NAIPCO) in response to N51.30bn decline in pension assets.

Agudah who attributed the pension fund assets decline of N51.30 bn in February to the depreciation in the prices of Fixed Income Securities (FISs) in the trading portfolios of the Approved Existing Schemes (AES), RSA Funds II and IV and Closed Pension Fund Administrators (CPFA), noted that the loss is minimal when subtracted from the N12.29 tr pension asset, “it is not even up to 0.01 percent, so the percentage loss is minimal.”

“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”, Agudah cleared.

On the same stream of balance of safety and returns, the Head, Media, Communications and Branding Committee, PenOp, Amaka Andy-Azike, (pictured) explains that the decline in the pension funds are unrealized losses and therefore not fatigued for rerun in the investment deployment. However, said pension funds operators are sourcing for other means in the investment buffet to increase yields.

Putting firm hands on corporate rules, Andy-Azike who also the managing director at Fidelity Pension Managers Limited 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 2 per cent but now some banks are offering 10 percent,” she said with rising satisfaction.

Relieved by current trends of government bonds that was once on the decline but have rebound, she said: “It was trending for 6 percent in some areas for long-term and 4 percent 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 bn.”

“Also, it is worthy to note that in the equity market most of these losses are not actual losses, they are unrealized losses because when the equity market goes up again, these yields will rebound and you will get much more. So, some of these losses are not realized losses and some have been corrected because there is increase in yield now in all our instruments; and we are currently looking out for other platforms that are safe to invest the funds. So, for us, the safety of your funds come first in all investment we partake,” she stated.”

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