A number of Pension Fund Administrators (PFAs) have been slammed with fines by the National Pension Commission or PENCOM for suboptimal investment returns in their fixed income portfolios in 2017 after an audit by the regulator, BusinessDay has learnt.
Sources familiar with the matter tell BusinessDay that the affected PFAs were hit with fines ranging from N500 million to N800 million, and that the funds will be taken from the PFA company funds and paid back into Pension Funds under management.
“PENCOM noted that some bond purchases and fixed deposits were way off market prices,” one source told BusinessDay anonymously because of the sensitivity of the matter.
“Most PFAs full year profits range between N800 million and N3 billion. So this fine may likely bankrupt one or two of them.”
Nigerian Pension Funds had total assets under management (AuM) of N7.5 trillion at the end of 2017, with investments into FGN Securities (bonds, Treasury Bills etc) making up 70.4 percent of investments, local money market securities 9.1 percent, domestic equities 8.9 percent and Real Estate properties 2.7 percent, according to data from PENCOM.
According to PENCOM reform act, 2014 investment guidelines: “any PFA who fails to comply with any provisions of this Act shall be liable to a penalty of not less than N500, 000 for each day that the non-compliance continues…and where the investment has led to a loss, the Pension Fund Administrator shall be made to make up for the loss.”
BusinessDay analysis of 19 Pension Fund Administrators (PFA), who had available data on historical unit price performance on their websites, showed that they had an average return of 16.29 per cent on their Retirement Savings Accounts (RSA) in 2017.
The 19 PFAs are AIICO Pension Managers Limited, APT Pension Fund Managers Limited, ARM Pension Managers Limited, AXA Mansard Pension Limited, CrusaderSterling Pensions Limited , Fidelity Pension Managers, First Guarantee Pension Limited, Future Unity Glanvils Pensions Limited, Investment One Pension Managers Limited, IEI-Anchor Pension Managers Limited, Legacy Pension Managers Limited, NLPC Pension Fund Administrators Limited, NPF Pensions Limited, OAK Pensions Limited, Pensions Alliance Limited, Premium Pension Limited, Sigma Pensions Limited, Stanbic IBTC Pension Managers Limited and Trustfund Pensions Plc.
Leadway Pensure PFA Limited and Radix Pension Managers Limited had limited information on their website to be able to determine performance for 2017.
Apt Pension was top on the list for unit price appreciation with returns of 22.24 percent in 2017, according to BusinessDay calculations.
CrusaderSterling followed in line with 19.79 percent, Investment One was third with 18.85 return, and others were; Pension Alliance Limited 18.21 percent, AXA Mansard 17.86 percent, First Guarantee, ARM, AIICO and Stanbic Pensions with returns of 17.80 percent, 17.52 percent, 17.25 percent and 16.42 percent respectively.
The rest were Premium Pensions, NLPC, Sigma and Legacy Pension Manager Limited with a return of 16.24 percent, 15.92 percent, 15.46 percent and 15.37 percent, Fidelity Pension Managers was next with a return of 15.29 percent, Trustfund had 14.79 percent, NPF recorded 14.09 percent, while FUG, OAK and Anchor were left to occupy the bottom space with returns of 13.65 percent, 13.47 percent and 9.21 percent respectively.
Out of the 19 Nigeria PFAs that was analysed by BusinessDay, nine were able to surpass the 2017 average inflation rate, which was reported by the National Bureau of Statistics (NBS) to be at 16.3 percent.
This implies that the firms above the rate had positive inflation adjusted returns.
On the performance of the PFAs in 2017, an analyst said the returns varied among the different pension funds depending on what they invested in during the year, as fixed income investment gained in the period under review.
“There was high yield on the assets invested, and some firms benefited in terms of returns, which was driven by the high interest environment,” Ayo Akinwumi, Head of Research FSDH Merchant Bank told BusinessDay by phone.
Looking at the latest available asset mix of investment portfolios of the PFAs as gleaned from their websites, Apt pension’s portfolio is composed of 18.8 per cent of equities, and a total bond portfolio of 41.64 per cent (30.3 per cent of FGN bond, 1.93 per cent of State bond and 9.41 percent of corporate bond).
Crusader Sterling has an equities portfolio of 18 percent, with FGN bond of 70.84 percent, 1.56 per cent of state bond and 1.86 per cent of corporate bond.
Equities value of 13.88 per cent, government securities of 62.6 per cent and corporate bonds of 5.49 per cent was reported by Investment One PFA.
PAL Pensions reported only their equities value of 7.88 per cent, with no reference to the bonds structure. On the other hand, AXA Mansard Pensions leveraged on equities of 10.45 percent and 83.59 per cent of government securities.
While AIICO, Sigma, Trustfund, NPF and Anchor failed to report their RSA fund investment portfolio on their respective websites, First Guarantee PFA had the 2016 figures on its website.
Premium Pension has FGN bond of 48.48percet, State at 1.17percent and corporate at 2.03 percent. Legacy on the other hand reported 37.17 percent FGN bond, 2.19 percent of states and corporate bond of 1.37 percent. Although they both did not state the value of equities, as gathered from their website
ARM Pension stated assets composition of 14.18 percent of equities and a total bond of 66.21 percent, although it was not broken down to know the percentage that was for FGN, state and corporate.
NLPC and Fidelity Pensions followed in the same trend as AXA Mansard, as both stated their equities of 9.18 percent and 9.27 percent respectively, while their government securities were recorded to be 69.86 percent and 75.66 percent respectively.
FUG recorded equities of 3.38 percent while OAK did not but both had their corporate and government bonds at 7.16 percent & 71.83 percent and 4.77 percent & 70.32 percent respectively.
BALIKEES ROTINWA & ENDURANCE OKAFOR
