‘Investment Regulation Review Not Necessary for Pension’

27 Feb 2013

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CEO,  Stanbic IBTC Pension Managers Limited, Dr. Demola Sogunle

Nnamdi Duru
Peding the raising of the limits of pension assets that could be invested in company equities and corporate bonds by the next quarter, company executives who may be warming up to accessing such funds have been warned to get their minds off it.

They have been told that raising this bar may not make any difference for most of them because pension fund operators will only investment in companies that offers them the ideal fundamentals in terms of investment returns and safety of funds.

The Chief Executive Officer of Stanbic IBTC Pension Managers Limited, Dr. Demola Sogunle, stated the obvious in an exclusive interview with THISDAY in Lagos.

According to him, the decision by the regulator to raise the level of pension funds that could be invested in equities, corporate bonds and infrastructure may not make any difference in the market, going by realities on ground.

“Whilst pension fund belong to contributors and the investment horizon is medium to long term, we typically seek to achieve reasonable risk-adjusted returns for them and so we will be chasing investment opportunities that guarantee optimal returns. Where the stock market can satisfy this objective, PFAs will be encouraged to invest.

“Some key considerations for PFAs aside from strong financials are the issues of corporate governance and quality of management of listed companies. Thus, increasing the bar in itself will not automatically translate to increased investments in the equities market,” he said.

He also bared his mind on the agitation for the investment of pension assets to improve infrastructure across the country, saying there is still a very long way to go in this regard.

“Pension funds are allowed to invest in infrastructure either through infrastructure funds or infrastructure bonds. However, despite the allocated limit to this asset class, investment by PFAs is presently very low because of lack of eligible instruments. Therefore, raising the bar is not the problem but availability of eligible investment propositions.

“We recognise the significant impact that pension funds can play in infrastructural development, it is important that the appropriate structures to guarantee safe of investments are put in place. Products that meet the investment guidelines also need to be made available for the investment of pension funds.  Currently, such structures barely exist and any investments made without it may not positively influence the fund value,” Sogunle said.

The National Pension Commission (PenCom) said it would soon release an updated investment regulation to give teeth to its decision to give Pension Fund Administrators (PFAs) more options for the investment of the pension assets under their management.

This was in furtherance with the commission’s decision to create more investment options for pension assets in response to stakeholders’ complaints that fund managers were not given a free hand to invest pension assets using their skills and experience to maximise returns on funds under management.

The commission confirmed this in a statement titled, ‘Amendment to the Regulation on Investment of Pension Fund Assets’.
According to the commission its investment regulation has been revised to accommodate more investment options, adding that before the end of this quarter, the commission would release an updated version of its investment regulation to formally give more investment option for pension assets.

The pension regulator stated its expectation that in this quarter, the operators would embark on public education, preparatory for the implementation of the new categories of investment options created recently.

“The regulation on Investment of Pension Fund Assets (Regulation) had been further revised in response to the dynamics of the financial and regulatory environment. The major highlights include the introduction of Exchange Traded Funds (ETFs) as allowable instruments; and incorporation of Guidelines on Global Depository Receipts/Notes (GDRs/GDNs) and Eurobonds, amongst others. The regulation becomes effective from 17 December, 2012.

“The new Multi-fund Structure for Retirement Savings Account (RSA) Funds would be incorporated into the amended Regulation in the 1st Quarter of 2013. This is to provide ample time for the commencement of a public education/sensitisation campaign on the multi-fund structure by the commission as well as for licensed Pension Fund Operators (PenOp) to be operationally ready to implement same,” the commission stated.

In the last quarter of last year, PenCom responded positively to stakeholders’ complaints that contributors were not given opportunity to maximise returns on their accumulated savings because fund managers were not free to invest using their skills and experience to maximise returns on funds under management.

The commission introduced four new types of funds, such that pension contributors could determine the instruments in which accumulated retirement savings should be invested.

Tags: Business, Nigeria, Featured, NAICOM, Demola Sogunle, PFAs

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