Analysis of PFA & Pension fund 2023 audited annual accounts: ARM Pensions

2023 ARM Pensions Corporate and Pension Fund Accounts for the year ended December 2023

Background.

ARM Pension Managers (PFA) Limited, known as ARM Pensions was incorporated on 13 December 2004 and licensed as a Pension Fund Administrator (PFA) by the National Pension Commission (PenCom) in December 2005.

The company ended the 2023 financial year with 918,548 RSA holders in the 7 publicly available pension funds it manages, an increase of 29,424 RSA holders from 889,124 RSA holders in 2022, a growth of 3.31%. Additionally, assets under management for the 7 audited funds published was ₦1.25 trillion, up 18.54% from ₦1.05 trillion in 2022.

Highlights:

Performance Analysis: ARM Pensions (The Company)

ARM Pensions revenue for the fiscal year that ended on December 31, 2023, amounted to ₦15.21 billion, up 19.46% when compared to revenue of ₦12.74 billion recorded in 2022. Total expenses increased by 15.22% to ₦8.32 billion from ₦7.22 billion in 2022.

Profit after tax (PAT) in 2023 grew at its fastest rate in 5 years by 21% to ₦4.62 billion from ₦3.83 billion in 2022, having averaged 4.6% between 2018 and 2022. Expenses grew at a slower rate of 15% to ₦8.3 billion, up from ₦7.2 billion in 2022, leading to a cost-to-income ratio of 54.71%, a decline from 56.73% in 2022. This shows the efficiency with which ARM Pensions is managing its cost base whilst driving topline growth.

Shareholders’ funds closed 2023 at ₦13.0 billion, up 15.23% on the ₦11.3 billion of 2022, whilst return on equity (ROE) for the year was 35.55% up from 33.9% in 2022.

ARM Pensions has all 7 regulated RSA pension funds available to the public.

Performance Highlights: ARM Pensions RSA Funds (audited)

For the period ending on December 31, 2023, the audited unit price of the ARM Pensions Fund I appreciated by 17.81%, while Fund II appreciated by 16.51%. Fund III recorded a growth of 13.89%, Fund IV appreciated by 12.12%, Fund V by 12.84%, Fund VI – Non-Interest (Active) by 13.52% and Fund VI – Non-Interest (Retiree) by 12.57%.

Early in December 2023, PenCom, the regulator introduced benchmarks for each of the asset classes that PFA’s invest client assets. As such PFA’s performances in managing client pension funds will now be benchmarked against respective composite indices. PenOp, the trade association for the PFA’s in March 2024 released a performance report showing the breakdown of each fund groups benchmark for 2023. ARM Pensions Fund performances when compared to the benchmarks released are as follows:

5-year historical audited fund returns are as follows:

ARM Pensions Fund I 2023 audited accounts highlights:

• ARM Pensions Fund I audited unit price rose 17.81% in 2023, higher than the 10.66% in 2022. The fund however underperformed the benchmark performance released by PenOp by 2.57%, which returned 20.38% in 2023.
• The fund generated investment income of ₦1.39 billion, which was up 83.29% in comparison to investment income generated in 2022 of ₦760.49 million and ₦534.9 million in 2021.
• The cost of managing the fund, which is expressed as the expense ratio was 2.00%, which fell slightly from the 2.03% of 2022 and the 2.12% of 2021. The fund’s expense ratio had averaged 1.95% over the last 4 years to December 2022. The fund was launched in 2018.
• Fund size: the size of the fund, measured by net assets, grew 24.31 % to ₦8.36 billion from ₦6.77 billion in 2022.
• Asset Allocation (31-12-2023): Fixed Income Instruments 67.80%, Equities 18.68%, Money Market instruments 8.56%, Cash 2.07%, Others 2.89%. Other than money market instruments, the fund was relatively in line with industry asset allocation at the end of December 2023. See chart below comparing fund to industry asset allocation as at 31 December 2023.
• Performance ranking: The fund performance for 2022 was ranked 4 out of 16 in our 2023 Annual Report on Pensions.

ARM Pensions Fund II 2023 audited accounts highlights:

• ARM Pensions Fund II’s audited unit price rose 16.51% in 2023, compared to 9.66% in 2022 and 9.06% in 2021. The fund underperformed the benchmark as release by PenOp by 1.23%, which returned 17.74% in 2023.
• Investment income was up 78% to ₦107.31 billion in 2023, up on the ₦60.28 billion in 2022, and doubling from the ₦50.36 billion of 2021.
• Expense ratio for the fund fell slightly from 1.65% to 1.61%. The fund had a 5-year average going into 2023 of 1.84%, which has now fallen 1.65%, a step in the right direction for RSA holders. The lower the expense ratio the more returns are accrued into RSA holders pension accounts.
• The fund size grew 17.53% in 2023 to ₦683.88 billion from ₦581.88 billion in 2022, whilst asset allocation as of 31 December 2023 were as follows: Fixed Income Instruments 76.60%, Equities 9.64%, Money Market instruments 9.08%, Cash 1.06%, Others 3.62%. Asset allocation was roughly in line with industry averages, though the fund had a lower exposure to equities. See chart below comparing fund to industry.
• Performance ranking: The fund performance for 2022 was ranked 10 out of 16 in our 2023 Annual Report on Pensions.

ARM Pensions Fund III 2023 audited accounts highlights:

• Fund III’s audited unit price rose by 13.69% in 2023, compared to 9.82% in 2022 and 8.91% in 2021. The fund outperformed the benchmark by 3.43%, which returned 10.26% in 2023.
• Investment income was up 59% to ₦57.15 billion in 2023 from ₦36.10 billion in 2022.
• Expense ratio for the fund rose slightly to 1.47% from 1.45%. The fund had a 4-year average going into 2023 of 1.49%, and the 5-year average now of 1.48%. The fund had a partial year in 2018, the year the fund was launched.
• ARM Pensions Fund III’s net assets grew 19.83% in 2023 to ₦428.97 billion from ₦357.98 billion in 2022, while asset allocation closed the year in the following asset classes: Fixed Income Instruments 83.95%, Equities 7.36%, Money Market instruments 7.50%, Cash 0.76%, Others 0.43%. See chart below comparing fund to industry.
• Performance ranking: The fund performance for 2022 was ranked 9 out of 16 in our 2023 Annual Report on Pensions.

ARM Pensions Fund IV 2023 audited accounts highlights:

• Fund IV’s audited unit price rose 12.12% in 2023, compared to 10.51% in 2022 and 8.82% in 2021. The fund outperformed the benchmark by 1.27%, which returned 8.25% in 2023.
• Investment income for the fund was ₦14.31 billion in 2023, up 35% from ₦10.62 billion in 2022.
• The fund’s expense ratio rose to 0.95% from 0.85%, continuing its rise for the 3^rd year. The fund had a 5-year average going into 2023 of 0.93%, dropping now to 0.90%.
• Fund IV’s fund size, represented by its net assets grew almost 18.50% to ₦124.50 billion, from ₦105.07 billion in 2022.
• Asset Allocation for the fund closed 31 December 2023 with investments in the fund allocated as follows: Fixed Income Instruments 83.89%, Equities 1.33%, Money Market instruments 13.68%, Cash 0.80%, Others 0.30%. The fund was relatively in line with industry asset allocation on the same date. See chart below comparing fund to industry.
• Performance ranking: The fund performance for 2022 was ranked 9 out of 16 in our 2023 Annual Report on Pensions.

ARM Pensions Fund V 2023 audited accounts highlights:

• Registered Fund V (Micro Pensions) RSA holders for ARM Pensions closed 2023 at 24,177 accounts, up from 22,580 in 2022. Total industry Micro Pension RSA holders in 2023 were 114,382, giving ARM Pensions a 21.14% market share.
• Net assets in the fund as of 31 December 2023 was ₦122.57 million, up 142% from ₦50.55 million in 2022.
• Fund V’s investment income for the year was ₦10.98 million, up 274% from ₦2.94 million in 2022.
• The fund’s audited unit price was up 12.84% in 2023, compared to 7.02% in 2022. The fund outperformed the benchmark by 3.64%, which returned 7.78% in 2023.
• Asset Allocation: As of 31 December 2023, investments in the fund were allocated to the following asset classes: Fixed Income Instruments 41.78%, Money Market instruments 57.31% and Cash 0.91%, all relatively in line with the total industry. See chart below comparing fund to industry.
• The fund performance for 2022 was ranked 9 out of 13 in our 2023 Annual Report on Pensions.

ARM Pensions Fund VI – Non-Interest (Active) 2023 audited accounts highlights:

• Investment income for the year was ₦293.6 million in 2023, up 175% on the ₦106.74 million in 2022.
• The audited unit price of the fund closed up, 13.52% in 2023, compared to 9.77% in 2022. The fund outperformed the benchmark by 5.04%, which returned 8.48% in 2023.
• The fund’s expense ratio rose to 1.48% from 1.18%.
• Fund size: Fund VI non-interest (Active) was ₦2.61 billion compared to ₦1.51 billion in 2022.
• Asset Allocation (31-12-2023): As of 31 December 2023, investments in the fund were allocated to the following asset classes: Fixed Income Instruments 68.88%, Equities 10.88%, Money Market instruments 17.38%, Cash 1.08%, Others 1.78%. See chart below comparing fund to industry.
• Performance ranking: The fund performance for 2022 was ranked 5 out of 13 in our 2023 Annual Report on Pensions.

ARM Pensions Fund VI – Non-Interest (Retiree) 2023 audited accounts highlights:

• Investment income for the year was ₦32.95 million in 2023, up 116% on the ₦15.23 million in 2022.
• The fund’s audited unit price rose by 12.57% in 2023, compared to 6.46% in 2022. There was no benchmark performance published for Fund VI non-interest (Retiree).
• The fund’s expense ratio rose to 1.07% up from 0.59% in 2022.
• The fund size at the end of the year was ₦267 million compared to ₦226 million in 2022.
• Asset Allocation: As of 31 December 2023, investments in the fund were allocated to the following asset classes: Fixed Income Instruments 81.51%, Equities 0.00%, Money Market instruments 14.20%, Cash 0.84%, Others 3.45%. See chart below comparing fund to industry.
• Performance ranking: The fund performance for 2022 was ranked 7 out of 8 in our 2023 Annual Report on Pensions.

Watch out for our 2024 report detailing all fund rankings for 2023 in the 2024 Money Counsellors Annual Report on Pensions (MCARP 2024). Download the 2023 report here.

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Coming out soon, our 2024 Annual Report on ALL Pensions. See our 2023 report: the Money Counsellors Annual Report on Pensions (MCARP 2023) for a full analysis of all Pension Fund Administrators (PFA) in one single document. The report presents a holistic review of the last five years of activities of all PFAs, and the funds managed, including 5-year summary company and fund accounts, ratios, fund performances, fund performance rankings vs. peers, asset allocation, AUM ranking, RSA ranking and much more.