Pension investments in equities at a 6 year high.

For the first time in 6+ years, pension fund allocation to equities has increased and maintained a level above 10%. Pension fund equity exposure closed 2023 at 9.66% but increased to 11.53% by the end of January 2024 and has remained above 10% thus far into 2024 averaging 10.99%.

The last 12 months

Focusing on the last 12 months, the July 2024 monthly report showing pension funds asset allocation published by PenCom reveals that pension fund exposure to domestic equities rose by 41.52% from ₦1.34 trillion to ₦1.89 trillion in the one year between July 2023 and July 2024 and 20.6% 2024 year to date (from ₦1.57 trillion to ₦1.89). That closing value of ₦1.89 equates to pension funds exposure of 3.41% of the closing market capitalisation of the NGX All-Share index on that date. This growth in equity exposure would be a combination of more addition to existing positions, as well as capital appreciation in positions but likely to exclude dividends received or ex-dividend shares. Over the same period of July 2023 to July 2024, the NGX All-Share Index rose 51.97%, and 30.76% January to July 2024.

Pension fund category exposures to domestic equities

Whilst unrealistic, but due to lack of complete data from the industry, if pension funds exposure and NGX market cap were the same at the start of each of these periods, then it could be extrapolated that the pension funds equity exposure growth has underperformed the growth of the NGX All-Share index (41.52% vs 51.97% and 20.60% vs 30.76%). However, this is masked by differing levels of equity investments by the different pension fund groups as detailed below:

*28 Aug 2023 to 31 Jul 2024

It is worthy to note that regulations allow different exposures to equities (included in variable income instruments) by the different RSA funds as shown in column 2 below. Each of these funds have had differing changes in exposure to equities. What should be a bit surprising is that the fund that should have the greatest exposure to equities, RSA Fund I saw a reduction in exposure over the stated period. But no fund has come close to regulatory limits allowed.

July31 2023 to 31 July 2024

Source: PenCom Reports

2024 Year to 31 July

Source: PenCom Reports

All Asset Allocation

From the outside, we cannot, without more comprehensive data make a conclusion as to why PFA’s exposure to equities, is generally low or if those equity holdings are underperforming, performing in-line or outperforming the equity market indices within each respective pension portfolio. PFA’s are required to publish the last 7 days of asset allocation on their website, but only few do, and even fewer any comprehensive data on asset allocation. However, we will do our best to continue to provide independent analysis using information available.

Industry asset allocation December 2018 to July 2024 (more detailed charts here):

The Pension Broad Index – focusing pension fund assets in equities

In 2023, PenCom and the NGX launched the Pension Broad Index. Investments must meet strict criteria to be eligible as pension fund investment. The index was designed to track the performance of the equity securities that adhere strictly to the profitability and dividend payment criteria, along with other parameters specifically tailored to the pension industry. The index began trading on 28 August with 84 constituent members and tracks the performance of these constituents. The index had risen by 49.65% in the 11 months to 31 July 2024.

Respective pension fund equity disclosures as of 31 July 2024

All asset allocation charts showing breakdown is available here.