NGX Pension Broad Index performs far better than Funds managed by all PFAs in Nigeria
The Nigerian Exchange Limited (NGX) in partnership with the National Pension Commission (PenCom) and the Pension Fund Operators Association of Nigeria (PenOp) held a webinar on the NGX Pension Broad Index. The webinar highlighted the importance of the benchmark for the industry.
In his opening speech at the webinar, the acting Chief Executive Officer of NGX, Jude Chiemeka, who was represented by acting Divisional Head, Capital Markets, NGX, Tony Ibeziako, said that the exchange had been at the forefront of providing indexes for the capital market for decades and will continue to do so to deepen the market.
He said: “We believe that this webinar will be of immense value to the stakeholders. NGX has been at the forefront of providing benchmarks for the Nigerian capital market for over 40 years. Over the years, the exchange has been proactive in providing more indexes. Now, we have over 20 benchmarks with five of them being sectoral.
“The year-to-date gains of the NGX pension broad index is 32 per cent. The NGX thought it to socialise the market with this index hence this all-important webinar. We promise to continue to partner with market stakeholders like PenOP and PenCom to boost the market in Nigeria and Africa.”
During his presentation, the Chairman, NGX Index Governance Committee, Abimbola Babalola, said that the benchmark offers pension fund administrators a reference point to measure their performance as well as broaden their choice of securities.
“With this broad index, PFAs now have a benchmark to compare their performance against. It is also like a guide for investors. Instead of cheery picking, they can look at the constituents of the NGX broad benchmark and decide on which stock to pick,” Babalola, who is also the Head, Market Surveillance, NGX Regulation, said.
In his contribution, the Head, NGX Secondary Market, Kazeem Alimi, said: “The index is to be able to give a reference and quantify performance. It brings in the mid-cap and large cap stocks. This is a move that ensures that the benchmark is well ahead of challenges that can come up.”
The Chief Investment Officer of Shell CPFA, Ehis Uzenebor, said: “The decision to intentionally push for benchmarking is a testament to the growth that the market has achieved. With appropriate benchmarking, fund managers can evaluate themselves. The board and trustees can also evaluate how fund managers can. It provides an objective basis for comparison across the industry.
“When it comes to the role of risk management. If you appropriately benchmark, then to some extent, risk management appears elevated. It is also useful for the regulator in the sense that the regulator is able to ascertain and evaluate the appropriate the relevance of guidelines from time to time.”
Head, Investment Supervision Department, PenCom, Abdulqadir Dahiru, said: “We started on this journey with the NGX and it culminated in the NGX Broad Pension Index which provides diversification. From 40 stocks in the NGX Pension 40, we are now talking of 84 securities. We believe it is more representative and gives PFAs choices and helps them measure their performance.
“I believe that while we are at this, we must look at the issue of capacity building. I think some of our PFAs have weaknesses around their investing team, so I will encourage the market to improve capacity, and understanding so they can go into the market with a bit of certainty. There are some stocks which we have brought in which PFAs were not even looking at.”
PensionNigeria Comment
Effective from February 2024 Performance monitoring for all PFAs, we will compare the performance of NGX Pension Index and NGX Pension Broad Index with performance of all PFAs in Nigeria, based on reports we are working on, NGX Pension Broad Index Return on Investment from 1st January 2024 to 29 February 2024 is 34.53% and it is far better than performance of all PFAs, but it is necessary to note that PFAs can not just invest all the funds in stocks under the INDEX because there are regulations that limits the amount that can be invested in each stock, sector etc.
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