Pension Fund Managers Shun Domestic Stocks, State Govt Bonds
In their earnest search for investment portfolios that will yield maximum returns and ensure security of their investments, pension fund managers have penciled down domestic stocks and state government bonds as two dreadful investment portfolios that will henceforth not receive much of their consideration. They have instead retained high confidence in federal government bond which they described as cornerstone of pension funds investing.
Against this backdrop, pension funds Managers and custodians, have in recent times continued to reduce investments in stocks, turning their eyes away from state government bonds while increasingly searching for other investible asset classes that will provide them with safety, security, liquidity, competitive returns and acceptable exit route.
Rather than investing in stocks, the managers said they prefer investment in infrastructural projects that qualified for pension investments in the areas of transport, power and urban regeneration among others.
Both erstwhile Managing Director PAL pensions, David Uduanu and Managing Director, Future Unity Glanvils Ltd, Usman Suileman, told THISDAY in separate interviews that rather than investing in stocks, they prefer encouraging project managers, fund sponsors, investment promoters and other stakeholders to come up with vehicles that will qualify for pension funds investments.
“We are anxiously looking for such vehicles. I’m glad to say that there are some of the fund managers, private equity funds, project managers, and promoters who, in recent times, have been working very hard both locally and in partnership with other foreign interested parties trying to come up with various infrastructure projects that will qualify for pension funds.
These are in the areas of transport, power, and urban regeneration and so on. Projects such as the Oshodi Interchange Centre, trailer park on the Snake Island, east-West railway line, the fourth mainland bridge, and various captive power plants are good candidates if well packaged,” said Suileman.
On his part, Uduanu explained that the reason for their preference of government bond investing is because the government is the largest issuer in any market.
“Government bonds are used to finance the budget and in economies that are well structured, you find that these budgets are used to finance capital expenditure. So indirectly, government bonds investment is an indirect way of pension funds putting money in infrastructure.
“However, the problem in Nigeria is that the budget in Nigeria is skewed towards recurrent expenditure. The bonds are profitable. Two years ago, we had government bonds as high as 16 per cent. That is perhaps one of the highest investments you can make here,” he explained.
Speaking on their reasons for reducing investments in stock market, Uduanu said the stock market over the last eight years since the financial crisis has not really done very well.
According to him, its performance has been that of “three years of good performance and five years of bad performance.”
“So government bond invest- ment has been profitable and it does add value to people’s life because this investment is used for the budget and government is still the largest employer of labour in Nigeria and some proportion of that goes into infrastructure. In fact, on the state government bonds, what Lagos state issued can appropriately be called infrastructure bonds because the bonds that were issued were used to fund all the road projects that you see in Lagos state which includes the Badagry Expressway or the rail line Lagos state is building. So it does really add value to people’s life,” he explained.