NPF Pensions Managers, Pensions Alliance Limited (PAL) Pensions and Access Pensions are the best performing Pension Funds this year, even as most Pension Fund Administrators (PFAs) missed out on the spectacular rally in equities, so far in 2023.
NPF Pensions fund price has gained 17% year-to-date (YTD), followed by PAL Pensions up 16.34% and Access Pensions Limited up 13.54%, according to retirement savings account or RSA Fund II data compiled by MoneyCentral (see table).
The RSA Fund 2 is the default fund under the Multi-fund structure for RSA holders who are below 50 years old.
The top 3 performing funds also had the highest asset allocation to domestic equities with NPF at 23.65%, PAL at 17.87% and Access Pensions at 11.21% as at September 2023.
This compares to the average exposure to domestic equities by Pension Funds of 7.84% of total assets as at July 2023, according to the latest PENCOM data.
Nigeria’s broad stock market index has gained 29.52% year to date.
Premium Pension Limited is in fourth position returning 12.64% year to date, FCMB Pensions Limited is next with 12.21%, TangerineApt Pensions Limited 12%, CrusaderSterling Pensions Limited 11.94%, ARM Pension Managers 11.71%, Trustfund Pensions Limited 11.61% and Leadway Pensure PFA Limited 11.58% to make up the top 10.
Most fund managers still underperforming inflation
Despite the double digit gain, most Pension fund managers are underperforming inflation, when RSA returns are juxtaposed with rising headline inflation, reinforcing the negative real returns on Naira-denominated assets, a risk which continues to discourage savers and investors in Naira-denominated financial assets.
Whilst the best performing NPF Pensions fund price has gained 17% year-to-date, headline inflation printed at 25.8% in August, a more than 18-year high, thus reinforcing the negative return on Naira-denominated assets.
The impact of a negative real return is particularly harsh on pension and life insurance funds, given that the opportunity cost of a negative real return is perhaps the highest for these class of investors.
For Retiree Savings Accounts (RSAs), the negative real return translates to lower pay-out to pensioners, thus implicitly reducing their standard of living.
Given that annuity payments are fixed, the opportunity cost of a low interest rate environment is borne by the life insurance firm, resulting in major underwriting losses for most life insurance firms whilst also making new annuity offerings less attractive to new clients.