PAL’s Investment Philosophy is premised on providing all pensionable employees in Nigeria with secure and adequate funds post-retirement, to enable them enjoy a decent standard of living. PAL will be ensuring contributions are preserved and grown to achieve real rate of return in the medium to long term.
We have taken into consideration the risk tolerance of Pension Funds which include factors such as:
- Investment time horizon – emphasis is on long term investment;
- Workforce demographic characteristics – includes among others average age and years to retirement;
- Plan design – such as Single Fund versus Multiple Fund structure and investment limits
- Funded status – Defined contribution of minimum of 18% of employee’s pension emolument jointly by employer and employee;
- Risk preference – incorporates Ethical/religious stance of employee;
- Ancillary goals – may include desired improvement in pension benefits through additional voluntary contributions.
We have also acknowledged the changing Capital Market expectations such as:
- Availability of long term funds from Pension Assets;
- Ongoing reactivation of the Bond market;
- Increasing number of companies accessing by way of listing or raising funds from the Capital Market;
- Prospects of enabling framework for new securities – Real Estate Funds, Mortgage and Asset Backed Securities;
- Post Banking consolidation and its pricing impact due to competition on Money Market instruments
In light of the above limiting Pension constraints, we are adopting an integrated Asset Allocation strategy that selects an optimal portfolio of assets which would meet employee’s contribution goals. In allocating funds to the various Asset classes and investment instruments, we are guided by (1) legal requirement by National Pension Commission (PENCOM) for investment and (2) Our Research Approach:
- The investment guidelines/limits as provided by PENCOM from time to time forms the primary and overriding basis of our Asset Allocation
- Our research approach adopts a top down approach in formulating investment strategies, which begins with the qualitative research of broad economic policies (Budgetary focus, Fiscal and Monetary policies as they affect GDP growth rate, Inflation trend, Interest rate forecast, Employment level etc), thereafter, their impact on different Sectors/Industries and finally prospective companies are analysed and evaluated to determine the suitability of their stocks/instruments
