‘Poor yields on securities, inflation affect pension growth’
07 January 2021 | 3:02 am
Low yield on fixed-income securities and escalating inflation rate are threats to the growth of pension fund assets in the short and medium-term, the Director-General
Low yield on fixed-income securities and escalating inflation rate are threats to the growth of pension fund assets in the short and medium-term, the Director-General, Lagos Chambers of Commerce and Industry (LCCI), Muda Yusuf, has said.
Yusuf, who spoke at an insurance forum in Lagos, advocated the de-risking of the real sector, to attract more investment. He stated that given their low-risk nature, pension funds are invested in Federal Government securities.
Hence, he said, fund managers have little exposure to volatile investment vehicles, adding that only six per cent of the funds are “locked inequities”.
He said: “Fund managers’ exposure to investment vehicles in the real sector is extremely low due to the high level of risk involved. Only two per cent of pension assets are invested in real estate and less than one per cent in an infrastructure fund.
“This is so also because fund managers often complain that projects in the real economy are non-bankable”
He noted that the growth trend of the pension assets has been on the upward trajectory in the last three years with assets under management rising by 42.9 per cent in less than three years, from N7.94 trillion as of March 2018 to N11.35 trillion as of August 2020.
“Pension fund assets have appreciated by 8.8 per cent to N11.35 trillion by the end of August 2020, from N10.43 trillion it stood in January 2020 amidst low return rates on government securities,” he said.