Fund Manager's Report

Fund Managers' Report As At 30th September, 2019

Domestic Economic Update

The Nigeria’s Purchasing Managers Index (PMI) posted 57.70 in Q3, 2019 (which is significantly above 50 expansion threshold). The index grew at a faster rate when compared to 57.40 recorded in Q2, 2019, being the thirtieth consecutive expansion in the manufacturing sector. The expansion was as a result of faster growth in new orders and inventories, while production level, supplier delivery and employment level grew at a slower rate in the period under review.

Also, the Nigeria's Gross Domestic Product (GDP) grew by 1.94 %( year-on-year) in real terms in the second quarter of 2019.

The Nigerian Bureau of Statistics (NBS) released the Consumer Price Index (CPI) report for August, 2019 where Headline Inflation for August

 - measured Year-on-Year (Y-o-Y) – decreased by 20bps to 11.02% when compared with 11.22% posted in Q2, 2019, which happens to be the lowest reported since February, 2016. The reduction was partly due to harvesting period and declining consumer disposable income during the period under review.

On to governance updates, in its drive for a cashless economy, the Central Bank of Nigeria (CBN) instructed Deposit Money Banks (DMBs) to charge a specific percentage on deposits and withdrawals above N500,000 (Individual) and N3million (Corporate) commencing in some selected states of the Federation. Also, the Federal Government set up a strategic committee to protect local manufacturers against any adverse effect that may arise as a result of The African Continental Free Trade Area (AfCFTA) agreement.

Financial Market Update

Capital Market Update

The stock market lost 7.80% in Q3, 2019 to close the period at 27,630.56 when compared with Q2, 2019 where it closed at 29,966.87. Year-to-Date (YTD), the stock market plummeted by 12.09%. The negative performance of the stock market in the period under review were as a result of sell pressure and profit taking activities of short term players.

In line with our medium /long term view of the equity market, we maintained our hold strategy on the stocks in the portfolio but garnished it a bit by selling those stocks with weak fundamentals. Meanwhile, as a professional fund manager that is conscious of the performance of the portfolio, we explored the fixed income securities market for safer investment with guaranteed income to stabilize and improve returns on investment.

The yields on Federal Government Bonds closed lower at the primary market in the period under review when compared with Q2, 2019 with stop rates on 5-year, 10-year and 30-year FGN Bonds closing at 14.3900%, 14.4300% and 14.6400% respectively. The 10- and 30-year tenors of the FGN bond were oversubscribed.

Foreign Exchange (FX) Market Update

At the official segment of the FX market, the naira depreciated in Q3, 2019 to N307.00/$1 when compared with its closed price of N306.90/$1 in Q2, 2019. Also, the naira weakened in the parallel market by closing Q3, 2019 at N362.23/$1 as against N361.50/$1 in Q2, 2019.

Monetary Policy And Inflation Update

The monetary policy committee (MPC) met during the period under review but did not tinker with the rates.

The latest official inflation rate as released by the Bureau of Statistics shows a 12 months average of 11.27% while the year-on-year change was 11.02%.

Key Economic Indicators

Find below the key economic indicators for your perusal:

  SEP-18 DEC-18 MAR-19 JUN-19 SEP-19
Exchange Rate (₦/USD)          
Official 306.35 307.00 306.95 306.90 307.00
Parallel 361.00 364.00 361.50 361.50 362.23
Monetary Policy Rate (MPR) % 14.00 14.00 13.50 13.50 13.50
Inflation Rate          
12-Mth Ave (%) 13.16 12.10 11.56 11.30 11.27
Year-on-Year (%) 11.28 11.44 11.31 11.40 11.02
Foreign Reserve (Billion USD) 44.38 43.19 44.34 45.07 41.99
Crude oil Price in the Int’l Market ($/barrel) 82.88 53.80 68.39 66.55 60.78
GDP Growth Rate 1.81% 2.38% 2.38% 2.01% 1.94%
NSE-ASI 32,766.37 31,430.50 31,041.42 29,966.87 27,630.56
NSE 30 1,473.63 1,417.15 1,392.65 1,255.68 1,147.00
NSE PENSION INDEX 1,226.16 1,207.46 1,188.02 1,058.77 989.81
Liquidity Ratio (%) 30.00 30.00 30.00 30.00 30.00
Cash Reserve Ratio (%) 22.50 22.50 22.50 22.50 22.50
NLPC PFA - RSA Fund I

the asset allocation which is in compliance with PenCom’s investment regulation and guidelines, stood as follows;

Quoted Equities 22%, Government Securities 58%, Money Market 19%, Cash and Others 1%.

The NLPC PFA – RSA Fund I opened with a unit price of N0.9799 in January 2019 and grew to N1.0234 as at 30th September, 2019 translating to year to date growth of 4.44% and an annualized return of 5.94%.

NLPC PFA - RSA Fund II

The asset allocation which is in compliance with PenCom’s investment regulation and guidelines, stood as follows;

Quoted Equities 8%, Government Securities 67%, Money Market 17% and Cash & Others 8%.

The unit price grew from N3.5738 in January, 2019 to N3.8337 as at 30th September, 2019 translating to a year to date growth of 7.27% and an annualized return of 9.72%.

NLPC PFA - RSA Fund III

The asset allocation which is in compliance with PenCom’s investment regulation and guidelines, stood as follows;

Quoted Equities 3%, Government Securities 66%, Money Market 28% and Cash & Others 3%.

The unit price grew from N1.0481 in January, 2019 to N1.1359 as at 30th September, 2019 translating to a year to date growth of 8.38% and an annualized return of 11.20%.

NLPC PFA - RSA Fund IV

The asset allocation which is in compliance with PenCom’s investment regulation and guidelines, stood as follows;

Quoted Equities 2%, Government Securities 74%, Money Market 22% and Cash & Others 2%.

The unit price grew from N3.0398 in January, 2019 to N3.3236 as at 30th September, 2019 translating to a year to date growth of 9.34% and an annualized return of 12.48%.

Outlook & Strategy
  • Data from the National Bureau of Statistics (NBS) showed that real Gross Domestic Product (GDP) grew by 1.94% in        the second quarter of 2019, compared with 2.10% and 1.50% in the preceding and corresponding quarters,                          respectively. This mediocre growth, we believe, is consistent with global trends of dampening output growth and was        driven mainly by the oil sector, which grew by 5.15% while the non-oil sector grew by 1.64%.
  • The economy will most likely gain some traction in Q4, 2019. This forecast remain underpinned by expectations of favourable oil prices which would lead to higher external reserves, stable exchange rate, moderate inflationary pressure as government increases capital expenditure, including enhanced flow of credit to the private sector to stimulate investment, sustained CBN interventions in the real sector, effective implementation of the Economic Recovery Growth Plan (ERGP), build-up of fiscal buffers, as well as improved security in the country. That said, a grimmer global economic outlook, downward-trending oil prices and disruptions to oil production are key risks to the outlook.  
  •  The downward movement in the stock market in the period under review can be attributed to the activities of the profit takers, fall in oil prices in the international market and absence of catalysts that would have spurred long term investors’ interest. We expect the stock market to close Q4, 2019 on a bearish note as foreign portfolio investors still maintain a risk-off approach to investing in equities. Against this background, we shall continue to maintain our medium to long term view of the equities market. Whilst holding on to stocks with good fundamentals, we shall continue to increase our holdings as buy opportunities exist.
  • Lastly, we expect yield in the fixed income market to decline slightly in Q4, 2019 due to CBN expansionary monetary policy posture, relatively stable exchange rate, declining inflation and the current rate cut in some developed markets, amongst others. In effect, we shall continue to explore strategies to take advantage of the fixed income market with strong bias on securities at the medium/long end of the yield curve in order to improve the portfolio return accordingly.   

  • We will continue to focus on our goal of growing the Fund under management by optimizing returns on investment without compromising the security and liquidity of assets and also ensuring that every worker with retirement savings account with the company receives his/her benefits as at when due.

                          

                          

                          

                          

                   

                       

                       

                       

                       

                       

                       

                       

NLPC PFA-RSA FUND I ASSET ALLOCATION AS AT 30TH SEPTEMBER,2019
ASSET CLASS MARKET VALUE(N'MLN) WEIGHT(%)
GOVERNMENT SECURITY 42.958 58
MONEY MARKET 14.179 19
EQUITIES 16.009 22
OTHERS 0.452 1
TOTAL 73.598 100
NLPC PFA-RSA FUND II ASSET ALLOCATION AS AT 30TH SEPTEMBER,2019
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 68.334 67
MONEY MARKET 16.994 17
EQUITIES 7.649 8
OTHER 8.798 8
TOTAL 101.775 100
NLPC PFA-RSA FUND III ASSET ALLOCATION AS AT 30TH SEPTEMBER,2019
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 57.046 66
MONEY MARKET 24.347 28
EQUITIES 2.943 3
OTHER 2.424 3
TOTAL 86.760 100
NLPC PFA-RSA FUND IV ASSET ALLOCATION AS AT 30TH SEPTEMBER,2019
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 25.091 74
MONEY MARKET 7.575 22
EQUITIES 0.762 2
OTHER 0.767 2
TOTAL 34.195 100
Number of RSA Holders: 287,414