Pension assets under management increased 11.7% to N15 trillion by December 2022 —PenCom

Data from the National Pension Commission (PenCom) on the regulated pension sector’s assets under management (AUM) showed that total assets under management for the regulated pension sector increased by 11.7 percent compared to annually (y/y) and 1, 3 percent month-on-month to nearly N15.0 trillion by December 2022.

According to FBNQuest, the composition of the AUM pension fund’s asset classes has hardly changed over the years. However, the share of corporate debt in the total portfolio rose to 11.1 percent in December 2022, up from seven percent the previous year.

In terms of value, corporate debt rose by N717 billion to about N1.7 trillion, up 76 percent year-on-year.

The issuance of large corporate bonds by Dangote Industries Limited, Dangote Cement and MTN Nigeria for N188 billion, N116 billion and N115 billion respectively was a major factor responsible for the surge in corporate debt in 2022.

Given the size of corporate issuance by the three entities, debt issuance by other companies was quite limited during the year, FBNQuest analysts said in a note to clients.

Federal government bonds, which account for the bulk of pension fund assets, grew 11 percent year-on-year to N9.2 trillion and contributed about 61.5 percent to pension funds under management.

According to the company, investment in FGN bonds increased by N894 billion due to high interest rates in 2022, fueling investor interest in fixed income securities.

In contrast, the value of pension AUM in domestic stocks marginally declined by one percent year-on-year to nearly N908 billion, taking the share from 6.8 percent in December 2021 to around 6.1 percent.

The stock market returned 20 percent y/y in 2022, while the market delivered a strong performance in the first half (H1)’22. However, aside from the strong close in the last few weeks, H2’22 was marked by a steady decline, dealers for the investment firm say.

According to the report, the total number of retirement accounts increased 3.5 percent y/y to nearly 9.9 million. This implies an average value of N1.52 million per holder of a retirement savings account (RSA), slightly higher than the N1.41 million in the same period last year.

“Going forward, we expect fixed income yields to remain high due to the expected increase in FGN paper supply by the Debt Management Office as the agency attempts to meet its domestic borrowing target to reduce the budget deficit of N10.8 trillion to help close.” the company said.