Fund Manager's Report

Fund Managers' Report As At 30th June, 2019

Domestic Economic Update

The Nigeria’s PMI posted 57.40 in Q2, 2019 (which is significantly above 50 expansion threshold). The index remained flat when compared to 57.40 recorded in Q1, 2019. However, the expansion was as a result of faster growth in production level, supplier delivery and employment level, while new orders and inventories grew at a slower rate in the period under review.

Also, the Nigeria’s Gross Domestic Product (GDP) grew by 2.01% (year-on-year) in real terms in Q1, 2019. Compared to the first quarter of 2018, which recorded real GDP growth rate of 1.89%, the Q1 2019 growth rate represented an increase of 0.12%.

The Nigerian Bureau of Statistics (NBS) released the Consumer Price Index (CPI) report for May, 2019 where Headline Inflation for May - measured Year-on-Year (Y-o-Y) –  increased albeit marginally by 0.09% to 11.40% when compared with 11.31% posted in Q1 2019. The planting season coupled with elevated security threats in the food producing states resulted in the decline in food supply. This coupled with increased seasonal demand, especially during the Eid-Fitri celebration pushed commodity prices northwards in the period under review.

On to governance updates, the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emiefele was reappointed for a second term, during the period. The CBN Governor unveiled the 5-year (2019 – 2024) policy direction for the apex bank, which includes targeting a double digit growth in the Nigerian economy, intervention in Foreign exchange market to ensure naira stability, youth intervention for financial empowerment, among others.

Financial Market Update

Capital Market Update

The stock market lost 3.46% in Q2, 2019 to close the period at 29,966.87 when compared with Q1, 2019 where it closed at 31,041.42. Year-to-Date (YTD), the stock market plummeted by 4.66%. The negative performance in the period under review were as a result of sell pressure and profit taking activities of traders.

In line with our medium /long term view of the equity market, we maintained our hold strategy on the stocks in the portfolio. 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 higher at the primary market in the period under review with stop rates on 5-year, 10-year and 30-year FGN Bonds closing at 14.3000%, 14.5000% and 14.6800% respectively. All the three tenors of the FGN bond were oversubscribed, depicting increased investors’ preference for risk free government securities.

Foreign Exchange (FX) Market Update

At the official segment of the FX market, the naira appreciated in Q2, 2019 to N306.90/$1 when compared with its closed price of N306.95/$1 in Q1, 2019. Meanwhile, the naira remained flat in the parallel market by closing Q2, 2019 at N361.50/$1.

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 11.30% while the year-on-year change was 11.40%.

Key Economic Indicators

Find below the key economic indicators for your perusal:

  JUN-18 SEP-18 DEC-18 MAR-19 JUN-19
Exchange Rate (₦/USD)          
Official 305.75 306.35 307.00 306.95 306.90
Parallel 363.00 361.00 364.00 361.50 361.50
Monetary Policy Rate (MPR) % 14.00 14.00 14.00 13.50 13.50
Inflation Rate          
12-Mth Ave (%) 14.37 13.16 12.10 11.56 11.30
Year-on-Year (%) 11.23 11.28 11.44 11.31 11.40
Foreign Reserve (Billion USD) 47.63 44.38 43.19 44.34 45.07
Crude oil Price in the Int’l Market ($/barrel) 79.23 82.88 53.80 68.39 66.55
GDP Growth Rate 1.50% 1.81% 2.38% 2.38% 2.01%
NSE-ASI 38,278.55 32,766.37 31,430.50 31,041.42 29,966.87
NSE 30 1,739.08 1,473.63 1,417.15 1,392.65 1,255.68
NSE PENSION INDEX 1,490.07 1,226.16 1,207.46 1,188.02 1,058.77
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 and performance of our NLPC PFA – RSA Fund I stood as at 30th June, 2019 stood as follows:

Quoted Equities 22%, Government Securities 50%, Money Market 28%. The NLPC PFA – RSA Fund I opened with a unit price of N0.9799 in January 2019 and grew to N1.0158 as at 30th June, 2019 translating to year to date growth of 3.66% and an annualized return of 7.39%.

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 68%, Money Market 17% and Cash & Others 7%. The unit price grew from N3.5738 in January, 2019 to N3.7502 as at 30th June, 2019 translating to a year to date growth of 4.94% and an annualized return of 9.95%.

NLPC PFA - RSA Fund III

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

Quoted Equities 4%, Government Securities 68%, Money Market 25% and Cash & Others 3%. The unit price grew from N1.0481 in January, 2019 to N1.1070 as at 30th June, 2019 translating to a year to date growth of 5.62% and an annualized return of 11.33%.

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 75%, Money Market 21% and Cash & Others 2%. The unit price grew from N3.0398 in January, 2019 to N3.1377 as at 30th June, 2019 translating to a year to date growth of 6.24% and an annualized return of 12.59%.

Outlook & Strategy
  • Available data points to a slight pick-up of activity in Q2, 2019, following a subdued performance in Q1, 2019 which was weighed by yet another contraction of the vital oil industry. Although the manufacturing PMI closed flat at 57.40 in Q2, 2019 when compared with Q1, 2019, the surge in PMI in the first two months of Q2, 2019 signaling that business dynamics remain upbeat.                            
  • The economy will most likely gain some traction in Q3, 2019. In particular, increased credit provision and the implementation of the minimum wage hike should lend support to consumer demand and the non-oil segment of the economy. However, the slow progress on structural reforms and oil price volatility pose 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, downward movement in oil prices in the international market and dearth of catalysts that would have  spurred long term investors’ interest. Meanwhile, as the Q2, 2019 unaudited results of listed companies start to trickle into the market, we expect the stock market to close Q3, 2019 on a bullish note. 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 to slightly increase in the fixed income market in Q3, 2019 due largely to surge in inflation, downward movement in oil price in the international market and blurred policy direction of Government. Basically, 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 JUNE,2019
ASSET CLASS MARKET VALUE(N'MLN) WEIGHT(%)
GOVERNMENT SECURITY 39.988 50
MONEY MARKET 22.489 28
EQUITIES 17.472 22
TOTAL 79.949 100
NLPC PFA-RSA FUND II ASSET ALLOCATION AS AT 30TH JUNE,2019
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 66.589 67
MONEY MARKET 17.024 17
EQUITIES 8.175 8
OTHER 6.961 7
TOTAL 98.748 100
NLPC PFA-RSA FUND III ASSET ALLOCATION AS AT 30TH JUNE,2019
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 56.873 68
MONEY MARKET 20.529 25
EQUITIES 3.207 4
OTHER 2.459 3
TOTAL 88.068 100
NLPC PFA-RSA FUND IV ASSET ALLOCATION AS AT 30TH JUNE,2019
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 24.883 75
MONEY MARKET 6.916 21
EQUITIES 0.819 2
OTHER 0.543 2
TOTAL 33.160 100
Number of RSA Holders: 304,207