DAILY INSIGHT: MULTI-FUND STRUCTURE FOR PFAS: A NEAR-TERM TRIGGER FOR EQUITIES?

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Earlier, NBS published the Nigerian Pension Assets and Membership report for Q1-18. Total Pension Assets rose 5.7% q/q to N7.9tn while contributors within the age bracket of 18 to 49 years remained at 74.5% while those older account for 26.5%.

By the provision of the Multi-Fund Structure (MFS) framework (comprising of 4 Fund types, differing by age and risk profile) for PFAs, set to take off by July 1st, 2018, our analysis showed that 11.4% and 1.2% RSA funds, qualified to be classified into Fund I-III and Fund IV, are currently invested in variable income instruments (Equities, Mutual Funds, REITS, and Private Equity Funds) respectively. Based on MFS, PFAs will have a minimum exposure of 10% for Fund II (default for age 18-49) and 5% for Fund III (default for age 50+ except retirees) to variable income assets. If this minimum is strictly followed and assuming no request is made for Fund I (strictly by request), our analysis indicates that PFAs current exposure to Fund II and III is already in line with the minimum requirement.

Accordingly, it is unlikely that the implementation of the MFS framework will have an immediate impact on the equities market, especially with the 6 months transition period provided for PFAs, to restructure their portfolios in accordance to the framework.

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