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2. 2  Pension Funds Investment  Pre-requisites for Pension Fund  Investment Guidelines  Portfolio of Pension Funds  Pension Fund Investment Challenges  Ways Forward

3.  The main goals of pension investment are to: Ensure adequate, affordable and sustainable benefits to contributors Secure safety & security of funds Ensure adequate liquidity to pay all pension benefits of contributors as and when due Achieve an optimal trade-off of risk and return through strategic asset allocation 3

4. 4  The Pension Reform Act, 2004 stipulated the type of investments allowed  National Pension Commission issues regulations and guidelines for the investment of pension funds:  Regulations on Investment of Pension Fund Assets  Regulations on Valuation of Pension Fund Assets  Regulations on Fees Structure  Guidelines and Format for Rendering Returns on Pension Fund Investment by Operators on Daily Basis monitors pension fund investments on daily basis

5. 5  Role of Pension Fund Operators  Pension Fund Administrators manage pension fund assets makes investment decisions  set investment objectives  formulate asset allocation strategies  tactically select assets for investment  analyse fund liabilities and future cash flow requirements review investment performance and render daily valuation report on pension fund investments to PenCom

6.  Role of Pension Fund Operators.. Cont’d  Closed Pension Fund Administrator s perform same role as PFAs on pension fund investments for their sponsoring organisations render monthly reports to PenCom  Pension Fund Custodians keep custody of pension fund assets on trust execute investment transactions on behalf of PFAs 6

7. 7  Authorised Markets for Trading Floor of Recognised Stock Exchange Money Market Trading Platform  Quality of Instruments Instruments/Issuers must be rated Records of past profitability and/or dividends payouts Instruments must be readily marketable  Regulated investment limits (asset class/instruments) & performance benchmarks

8. S/N ASSET CLASSMAXIMUM INVESTMENT AS % OF PENSION FUND ASSET PER ISSUERPER ISSUEMINIMUM BENCHMARK 1 Government Securities FGN 100% Maximum of 100% of total issue of FGN bond. No limit.Weighted Average Govt. 2 year bond rate (on bonds only). States 20% Maximum of 2% of Pension Fund Assets in one State Govt. Maximum of 2% of any one issue by a State Govt. 2 Corporate Bonds /Debt (including REITs, Mortgage and Asset Backed securities) 30% Maximum of 2.5% of all issues by one corporate. Maximum of 2.5% of any one issue. Weighted Average Govt. 2 year bond rate + 1%. 3 Money Market Instruments 35% Maximum of 1.0% of Pension Fund Assets in all instruments issued by one bank. Not applicable.365 day T Bill Rate. 4 Ordinary Shares 25% Maximum of 1.0% of Pension Fund Assets in any one corporate. Maximum of 1.0% of issued capital. NSE all share index (ASI). 5 Open and Close – end Funds 5% Maximum of 0.5% of Pension Fund Assets to one issuer. Maximum of 0.5% of any issued Close end fund. Maximum of 0.5% of Pension Assets in any Open/Hybrid Fund. NSE All Share Index (ASI). 8

9. 9  Pension Fund Assets: Generated pool of long term investible funds for the first time in Nigeria The industry has approximately N679.55 worth of assets as at 31 October, 2007 RSA assets – N159.05 billion CFPA assets – N195.01 billion AES assets – N325.50 billion RETIREMENT SAVINGS ACCOUNTS ASSETS AS AT 31 OCTOBER, 2007 NAME OF SECURITY TOTALWEIGHT NGN million (%) FGN SECURITIES 65,259.3141.03% STATE GOVT SECURITIES 00.00% CORPORATE DEBT SECURITIES 00.00% QUOTED STOCKS 36,201.1522.76% MONEY MARKET INSTRUMENTS 52,302.9732.88% OPEN/CLOSE ENDED FUNDS 1,668.331.05% UNINVESTED CASH 855.660.54% CASH /OTHER ASSETS 1,407.110.88% REAL ESTATE 3700.23% CREDIT INTEREST/DIVIDEND EXPECTED 1,171.530.74% PAYABLES -187.09-0.12% TOTAL PENSION FUND ASSETS 159,048.97100.00%

10. 10 Portfolio of Closed Pension Fund Administrators and Approved Existing Schemes as at 31 October, 2007 TYPE OF SECURITY CPFAAES AMOUNT (N)WEIGHT (%)AMOUNT (N)WEIGHT (%) FGN Securities48,282.2324.76%83,655.1725.70% State Government Securities107.140.05%0.000.00% Corporate Debt Securities50.000.03%105.250.03% Domestic Equity51,450.3426.38%106,554.6732.74% Foreign equity3,304.911.69%0.000.00% Domestic Money Market Securities28,549.9814.64%61,202.6618.80% Foreign Money Market Securities27,126.5313.91%0.000.00% Mutual Funds1,171.660.60%455.060.14% Property/Real Estate27,121.2113.91%45,479.8013.97% Cash & Other Assets5,936.703.04%17,007.385.23% Interest/Dividend0.000.00%3,891.371.20% Unqouted Equities1,908.290.98%5,062.711.56% Leasing0.000.00%2,601.000.80% Payables0.000.00%-520.71-0.16% TOTAL195,008.99100.00%325,494.36100.00% NOTE: weights are per scheme total

11.  Securing the safety and security of pension funds  Ensuring that pension funds invested earn real returns  Underdeveloped capital market for equities and fixed income securities  Dearth of investments instruments  High costs for raising investments in the capital market  Investment in real estate  Clamour for use of fund balances as collateral  Introduction multi-fund portfolios  Fees 11

12.  Shifting financial market from dependence on bank funding to Capital Market funding in order to facilitate economic development  Banks and asset management companies to develop corporate skills  Maintenance of macroeconomic stability  Ensuring that conflict of interest is minimised or prevented 12

13.  Inadequate capacity in the pension industry Operators Regulator Contributing public  Limited number of Rating Agencies and poor rating culture  Coordination between all institutions concerned CBN, SEC, NSE, DMO, CSCS, FIRS 13

14.  Encouraging companies to get listed on the stock exchange & solicit risk rating  Possibility of off-shore investments to mitigate against risk  Development of new investment instruments Corporate Bonds, REITs, Mortgage Backed Bonds, Infrastructural Bonds, etc 14

15. 15 Thank You! National Pension Commission Plot 174, Adetokunbo Ademola Crescent Wuse II, Abuja 09 – 4138736 – 40 info@pencom.gov.ng www.pencom.gov.ng