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Wednesday, February 1, 2023

Pension Funds rotate to local money market securities as yields slide

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Domestic Pension funds are reducing their exposure to FGN bonds and Treasury bills and parking more cash in local short term money market securities as yields on Government paper falls.

Latest data from regulator PENCOM shows Pension assets invested in local money market securities such as Bank placements and commercial paper surged by 35 percent or N422 billion between January and February 2020.

Total holdings of such securities amounted to N1.6 trillion at the end of February, equivalent to 15.25 percent of total Pension assets under management.

Pension assets in Bank placements amounted to N1.47 trillion, while investments in commercial papers took up N125.9 billion.

Holdings of FGN Securities fell to 67.51 percent of total Pension assets or N7 trillion in February, compared to N7.4 trillion equivalents to 70.96 percent of total assets in January.

Fund Managers are probably trying to secure better interest rates on funds invested after yields on Federal Government paper collapsed in the fourth quarter of 2019, following a push by the Central bank of Nigeria (CBN) to stop most domestic institutional investors and Pension Funds from investing in its open market operations OMO securities.

One-year Treasury Bills traded at 3.25 percent on Thursday, according to data from the FMDQ.

Pension Funds however remained underweight equities as holdings of domestic shares fell to 5.07 percent of assets in February from 5.71 percent in January 2020.

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