Economy
Nigerian Pension Funds Outperform Bench Mark Index
By Quantitative Financial Analytics
Nigerian pension funds once again recorded another year of brilliant performance in 2016 roundly beating the NSE Pension Index by wide margins.
The NSE Pension index ended the year 2016 at 810.04 points from its 2015 value of 815.16 points, thereby ending the year down by 5.13 points or -0.63%.
Savings Retirement Accounts (RSA):
Except for APT Pension Retirement Saving Account which ended the year with a negative performance of 22.96%, having lost N0.65 on the unit price of the RSA, every other RSA ended the year with positive performance of 8% or greater. The highest return of 12.67% came from AXA Mansard Pension Retirement Savings Account, followed by Future Unity Glanvills (FUG) RSA with 11.93%
Retiree Accounts:
The performance of the Retiree Accounts followed closely that of the RSA but unlike the RSAs, the Retiree Accounts did much better with no losses recorded by any one of them. Trust Pension Fund Retiree Account led the performance league with 14.68%. All the Retiree Accounts but one, recorded double digit positive return in 2016.
Asset Allocation is Everything
Asset allocation has been said to be responsible for most of the investment fortunes in history. That too can be rightly said about Nigerian pension funds. The implication of asset allocation is that it matters how a portfolio is divided between Bond, Equities, Cash, Money Market and other asset classes. Most Pension funds in Nigeria allocate at least 75% of their Asset Under Management (AUM) to fixed income securities (Government Bonds, Treasury Bills and corporate bonds). The interest rate on those assets has been on the increase over time and the CBN has signaled that it does not plan to reduce the rates any time soon. Though there is an inverse relationship between interest rate (yield) and bond prices, the increasing yield environment especially at the shorter end of the yield curve implies that matured bonds or treasury bills are being reinvested at higher yields and lower prices which benefits the pension funds. By having much of their AUM in fixed income securities, these PSAs tend to be insulated from the downside pressure of the stock market.
Asset Characteristics too
Another pointer to the performance of the Pension funds can be seen by looking at how they behave in relationship to the entire stock market. All the Pension funds have Betas of less than 1 indicating that they do not move in tandem with the stock market. This indication is also supported by the low R-Squared of the pension funds. All these relatively low statistics derive from the fact that majority of the pension fund assets are held in fixed income and money market instruments whose correlation with the market is relatively low.
A beta of 1 indicates that the security’s price moves in tandem with the market but a beta of less than 1 means that the security is imperially less volatile than the market while a beta of greater than 1 indicates that the security’s price is theoretically more volatile than the market. R-Squared on the other hand is a measure of the percentage of a portfolio’s or security’s performance that is attributable to the performance of its bench mark.
The implication of this is that for risk averse investors planning and saving for their retirement, it may be more prudent to overweight on pension fund assets by making additional voluntary contributions rather than investing same in the regular stock market.
Risk Adjusted Performance
Though the RSAs and other Retiree accounts are expectedly and comparatively less risky than similar products like Fixed Income Mutual Funds (as evidenced by their standard deviation of returns), their performance is not as mouthwatering as they seem when analyzed on a risk adjusted basis. Most of the pension funds have negative Alpha and negative Sharpe ratio, according to research by Quantitative Financial Analytics.
Alpha is a measure of the return on an investment compared to a suitable market index such that an alpha of 1% means the investment’s return over a period was 1% better than the market during that same period while an alpha of -1 means the investment underperformed the market. Sharpe ratio measures the risk adjusted performance of an asset or portfolio taking into consideration the prevailing risk-free rate.
The major reason for the negative alpha and Sharpe ratio is that the risk-free rate in Nigeria is quite high, (a risk-free rate of 15% was used for this analysis). Granting the low risk characteristics of the pension funds and the rising interest environment in Nigeria and compared to the performance of other asset classes, it will be appropriate to say Bravo to the pension fund managers for a job well done in 2016.
Contacts: [email protected]
By Dipo Olowookere
Investors at the Nigerian Exchange (NGX) Limited have continued to show excitement for the full-year earnings of companies on the exchange so far.
On Friday, Customs Street further appreciated by 1.01 per cent as more organization released their financial statements for the 2025 fiscal year.
During the session, traders continued their selective trading strategy, with the energy sector going up by 2.47 per cent at the close of business despite profit-taking in the banking counter, which saw its index down by 0.11 per cent.
Yesterday, the insurance space grew by 2.16 per cent, the industrial goods segment expanded by 1.70 per cent, and the consumer goods industry jumped by 0.42 per cent.
Consequently, the All-Share Index (ASI) increased by 1,722.13 points to 171,727.49 points from 170,005.36 points, and the market capitalisation soared by N1.106 trillion to N110.235 trillion from the N109.129 trillion it ended on Thursday.
Business Post reports that there were 59 appreciating stocks and 19 depreciating stocks on Friday, representing a positive market breadth index and strong investor sentiment.
The trio of Omatek, Deap Capital, and NAHCO gained 10.00 per cent each to sell for N2.64, N6.82, and N136.40 apiece, as Zichis and Austin Laz appreciated by 9.98 per cent each to close at N6.72 and N5.40, respectively.
Conversely, The Initiates depreciated by 9.74 per cent to N19.45, DAAR Communications slumped by 7.32 per cent to N1.90, United Capital crashed by 6.55 per cent to N18.55, Coronation Insurance lost 5.71 per cent to quote at N3.30, and First Holdco shrank by 5.53 per cent to N47.00.
The activity chart showed an improvement in the activity level, with the trading volume, value, and number of deals up by 33.77 per cent, 93.27 per cent, and 10.63 per cent, respectively.
This was because traders transacted 953.8 million shares worth N43.1 billion in 51,005 deals compared with the 713.0 million shares valued at N22.3 billion traded in 46,104 deals a day earlier.
Fidelity Bank was the most active with 92.4 million units sold for N1.8 billion, Chams transacted 69.2 million units valued at N310.9 million, Deap Capital exchanged 59.1 million units worth N382.7 million, Access Holdings traded 57.2 million units valued at N1.3 billion, and Tantalizers transacted 48.6 million units worth N228.2 million.
By Adedapo Adesanya
The value of the Naira contracted against the United States Dollar on Friday by 13 Kobo or 0.01 per cent to N1,366.19/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEX) from the previous day’s value of N1,366.06/$1.
According to data from the Central Bank of Nigeria (CBN), the Nigerian currency also depreciated against the Pound Sterling in the same market window yesterday by N2.37 to N1,857.75/£1 from the N1,855.38/£1 it was traded on Thursday, and further depleted against the Euro by 57 Kobo to close at N1,612.52/€1 versus the preceding session’s N1,611.95/€1.
In the same vein, the exchange rate for international transactions on the GTBank Naira card showed that the Naira lost N8 on the greenback yesterday to N1,383/$1 from the previous day’s N1,375/$1 and at the black market, the Nigerian currency maintained stability against the Dollar at N1,450/$1.
FX analysts anticipate this trend to persist, primarily influenced by increasing external reserves, renewed inflows of foreign portfolio investments, and a reduction in speculative demand.
In the short term, stability in the FX market is expected to continue, supported by policy interventions and improving market confidence.
Nigeria’s foreign reserves experienced an upward trajectory, increasing by $632.38 million within the week to $46.91 billion from $46.27 billion in the previous week.
The Dollar appreciation this week appears to be largely technical, serving as a correction to the substantial losses experienced from mid- to late January.
Meanwhile, the cryptocurrency market slightly appreciated, with Bitcoin (BTC) climbing near $68,000, up nearly 5 per cent since hitting $60,000 late on Thursday after investor confidence in crypto’s utility as a store of value, inflation hedge, and digital currency faltered.
The sell-off extended beyond crypto, with silver plunging 15 per cent and gold sliding more than 2 per cent. US stocks also fell.
The latest recoup saw the price of BTC up by 4.7 per cent to $67,978.96, as Ethereum (ETH) appreciated by 6.3 per cent to $2,021.10, and Ripple (XRP) surged by 9.5 per cent to $1.42.
In addition, Solana (SOL) grew by 7.3 per cent to $85.22, Cardano (ADA) added 6.1 per cent to trade at $0.2683, Dogecoin (DOGE) expanded by 5.4 per cent to $0.0958, Litecoin (LTC) rose by 5.2 per cent to $53.50, and Binance Coin (BNB) jumped by 2.3 per cent to $637.79, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
By Adedapo Adesanya
Oil prices settled higher on Friday as traders worried that this week’s talks between the US and Iran had failed to reduce the risk of a military conflict between the two countries.
Brent crude futures traded at $68.05 a barrel after going up by 50 cents or 0.74 per cent, and the US West Texas Intermediate (WTI) crude futures finished at $63.55 a barrel due to the addition of 26 cents or 0.41 per cent.
Iran and the US held negotiations in Muscat, the capital of Oman, on Friday to overcome sharp differences over Iran’s nuclear programme.
It was reported that the talks had ended with Iran’s foreign minister saying negotiators will return to their capitals for consultations and the talks will continue.
Regardless, the meeting kept investors anxious about geopolitical risk, as Iran wanted to stick to nuclear issues while the US wanted to discuss Iran’s ballistic missiles and support for armed groups in the region.
Any escalation of tension between the two nations could disrupt oil flows, since about a fifth of the world’s total consumption passes through the Strait of Hormuz between Oman and Iran.
Saudi Arabia, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, as does Iran, which is a member of the Organisation of the Petroleum Exporting Countries (OPEC).
According to Reuters, Iran objected to the presence of any US Central Command (CENTCOM) or other regional military officials, saying that would jeopardise the process.
The current confrontation was sparked by more than two weeks of unrest in Iran that saw authorities launch a deadly crackdown that killed thousands of civilians and shocked the world. As reports of the deaths trickled out of Iran, US President Donald Trump threatened to strike Iran if any of the tens of thousands of protesters arrested were executed.
Meanwhile, Kazakhstan’s planned oil exports could fall by as much as 35 per cent this month via its main route through Russia, as the country’s top oil company, Tengiz oilfield, slowly recovers from fires at power facilities in January.
ING analysts have pointed out Iran’s neighbour, Iraq, and a disagreement with the US as another bullish factor for oil prices. It seems Iraqi politicians favour Mr Nouri al-Maliki as the country’s next Prime Minister, but the US thinks Mr al-Maliki is too close to Iran. President Trump has already threatened the oil producer with consequences if he emerges as PM.
-
Feature/OPED6 years agoDavos was Different this year
-
Travel/Tourism9 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz3 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking8 years agoSort Codes of GTBank Branches in Nigeria
-
Economy3 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking3 years agoSort Codes of UBA Branches in Nigeria
-
Banking3 years agoFirst Bank Announces Planned Downtime
-
Sports3 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn