‘Safety, liquidity, returns critical to pension fund investment’

By Ogunbo Olalekan

Safety, liquidity and returns are major considerations for pension funds operators before investing pension funds, the Executive Secretary, Pension Fund Operators Association of Nigeria (PenOp), Mrs. Susan Oranye, said.

Executive Secretary, Pension Fund Operators Association of Nigeria (PenOp), Ms. Susan Oranye

Oranye, while speaking on the reasons why operators are reluctant to inject much pension funds in the capital market, noted that Pension Fund Administrators (PFAs) take their role as fiduciaries of other people’s savings extremely seriously which was why they are guided by the ‘Trifecta’(safety, liquidity, then returns).

Private equity, he said, offers higher returns but higher risks too, stressing that the operators are not averse to investing in equities; but that they will only do such investments through safe instruments or vehicles.

“We must see that there is a very clear path of getting invested capital back, plus a fair return. Our mantra has always been safety first, followed by liquidity and return. Remember that retirees will be paid with cash, not brick or mortar,” she stated.

She pointed out that, “There is need for some kind of credit enhancement to make the investments more attractive. This could come by way of partial or full guarantee of say, the Federal Government of Nigeria. The current PenCom guidelines have widened the playing field by allowing for investment in many alternative asset classes, including Private Equity, infrastructure bonds/funds, mortgage backed securities etc, so there is a diversified range of assets we can invest in.”

Oranye posited that the challenge to investment of funds is the quality of the available proposals, adding that the operators emphasises safety and liquidity over return.