The total funds under the Contributory Pension Scheme that have been invested in foreign markets rose from N52.5bn at the end of 2013 to N77.9bn in May 2015.
Statistics obtained from the National Pension Commission (PenCom) on Wednesday revealed that the Pension Fund Administrators (PFA) invested N52.5bn in foreign ordinary shares at the end of 2013, while the figure rose to N59.5bn and N72.9bn at the end of 2014 and May this year, respectively.
At the end of 2014, the PFAs had invested N120m in foreign money market, while the figure rose to N5bn at the end of May 2015 during which the total pension funds stood at N4.9tn.
When PenCom reviewed its investment guidelines earlier this year, it stated that Pension Fund Custodians (PFC) should only take written instructions from licensed PFAs with respect to the investment and management of pension fund assets.
It stated that in discharging their contractual functions to the PFAs, the PFCs should not contract out the custody of pension fund assets to third parties except for allowable investments made outside Nigeria.
In the review, PenCom stated that the PFC must obtain prior approval from the commission before engaging a global custodian for such allowable foreign investments.
“The PFAs, in discharging their contractual functions to the contributors, shall not contract out the investment/management of pension fund assets to third parties, except for open/close-end/hybrid funds and specialist investment funds allowed by this regulation,” PenCom stated.
The commission added that the PFAs should maintain a multi-fund structure as provided in the regulation to govern the investment of pension fund assets.
In addition to the other guidelines issued by the commission on corporate governance, ethics and business practices, it added that each PFA should establish an investment strategy committee as well as a risk management committee.
“The investment strategy committee, in addition to other functions specified in the Act, shall formulate internal investment strategies to enable compliance with this regulation, taking into cognizance the macro-economic environment as well as the investment objectives and risk profile of the respective PFA funds,” it stated.
As stated by the commission, the internal investment strategies shall be approved by the PFA in a formal board meeting at the commission at least once every year or as frequently as changes occur in the macro-economic environment that may affect pension fund assets.
It added that the risk management committee would determine the acceptable risk profile of each investment portfolio, draw up risk assessment and measurement systems, monitor the portfolio against risk tolerance limits, as well as all other functions relating to risk management to be determined by the PFA’s board and PenCom from time to time.
PenCom also stated that the risk management committee shall render a report of its activities to the board of the PFA and the commission at least once every quarter.
Pencom added: “The commission shall provide the necessary guidelines on the investment of pension fund assets outside the territory of the Federal Republic of Nigeria as and when the need arises.”