According to data from the National Pension Commission (PenCom), the total assets under management (AUM) for the regulated pension industry increased significantly by 20% y/y to NGN17.3trn in Aug ’23. This represents a healthy increase of NGN2.9trn compared to the previous year. The m/m performance of the industry’s assets was relatively flat (+1% m/m), slightly lower than the 2% growth it recorded the previous month.
FGN securities typically dominate PFAs’ asset class composition, accounting for 66% of the total AUM. In absolute terms, their value increased by 25% y/y to NGN11.5trn.
FGN bonds, which account for a significant share of FGN securities, increased by 25% y/y and 4% m/m to NGN11.0trn. Consequently, its share of AUM allocation increased to 64% from 62% the previous month.
As shown by our chart below, PFAs’ exposure to government bonds is higher than domestic equities and other assets.
A major factor underscoring PFAs’ significant asset allocation to FGN bonds is the increased supply of FGN paper in the primary market due to a higher domestic funding target compared to last year.
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The low-risk characteristics of government bonds, which suit pension fund managers’ portfolio safety considerations, is another contributing factor.
The industry’s asset allocation to domestic equities increased by 6% m/m to NGN1.4trn. As such, the percentage of PFA’s AUM increased to 8.2% from 7.7% in July ’23.
Looking ahead, we anticipate a rise in PFA’s allocation to domestic equities due to the bullish performance of the equity market.
Corporate debt, which accounted for about 11% of the total asset mix, increased by NGN477bn or 35% y/y to NGN1.9trn.
Although treasury bills constitute a fraction share (1%) of the total AUM, their value increased by 18% y/y to NGN211.8bn. On a m/m basis, it was up by 7% m/m.
