The twin challengers to pension assets- declining yield on fixed securities and rising inflation, are conflagration that is pushing pension assets further with its 1-2% low yield on treasury bills and inflation tipping the scales at 13.71%.
The Director General, Lagos Chamber of Commerce and Industry, Dr. Yusuf Muda, bemoaned the poor state of earnings when he delivered the keynote address at 2020 NAIPCO confab in Lagos, pointing out the stage should now be reset to establish an environment as the theme suggests, “Promoting Bankable Investments for Insurance and Pension Sectors.”
Because of the narrow stretch of bankable investments, Muda said a large chunk of pension funds are invested in federal government securities: bonds, and this also was prescribed by law as a safety net, thereby shielding investment fund managers from exposure to volatile investment vehicles, while six percent of pension assets are invested in equities. The low figures for investment continues, real estate gets 2% and less than 1% strays into infrastructure.
He said the growth of funds has not been matched with the availability of points of investments, noting that in the last three years Assets Under Management AUM, had risen by 49% from N7.94tr as at March 2018 to N11.35tr as at August 2020. This year, pension assets have appreciated by 8.8% to N11.35tr by end of August 2020 from N10.43tr by end of January 2020.
On insurance industry investment portfolio, he said there was need to maintain a balance between liquidity and returns on investment on bank placements, treasury bills, commercial papers, bonds, equities and real estate.