Fund Manager's Report

Fund Managers' Report As At 31st March, 2019

Domestic Economic Update

The Nigeria’s PMI posted 57.40 in Q1, 2019 (which is significantly above 50 expansion threshold). The index grew at a slower rate when compared to 61.10 recorded in Q4, 2018. The decline was as a result of slower growth in production level, new orders, inventories and employment level, while supplier delivery remained flat in the period under review.

Also, the Nigeria’s Gross Domestic Product (GDP) grew by 2.38% (year-on-year) in real terms in Q4, 2018.

The Nigerian Bureau of Statistics (NBS) released the Consumer Price Index (CPI) report for February, 2019 where Headline Inflation for February - measured Year-on-Year (Y-o-Y) – reduced to 11.31% when compared with 11.44% posted in Q4, 2018. The moderation in headline inflation was driven by both food and the non-food inflation categories.

On to governance updates, the Central Bank of Nigeria (CBN) unveiled fresh plans to revive the Palm Oil Value chain to enable the sector generate foreign exchange and reduce the level of unemployment in the country as part of the apex bank’s Anchor Borrowers Programme and its Commercial Agriculture Credit Scheme which would grant identified core borrowers loans at not more than nine percent per annum.

Financial Market Update

Capital Market Update

The stock market lost 1.24% in Q1, 2019 to close the period at 31,041.42 when compared with Q4, 2018 where it closed at 31,430.50. Year-to-Date (YTD), the stock market plummeted by 1.24%. 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 lower at the primary market in the period under review with stop rates on 5-year FGN Bond, 7-year FGN Bond and 10-year FGN Bond all closing at 13.5000%. The 10-year bond was oversubscribed depicting increased investors’ preference for longer-tenured government securities.

Foreign Exchange (FX) Market Update

At the official segment of the FX market, the naira appreciated in Q1, 2019 at N306.95/1$ when compared with its closed price of N307.00/1$ in Q4, 2018. The naira also appreciated in the parallel market as it closed the period Q1, 2019 at N361.50/1$ as against N364.00/1$ in Q4, 2017.

Monetary Policy And Inflation Update

The monetary policy committee (MPC) met during the period under review and voted to reduce MPR by 50bps to 13.50%, after sixteen consecutive sessions (33 months) of retaining rates at 14.00%.

The latest official inflation rate as released by the Bureau of Statistics shows a 12 months average of 11.31% while the year-on-year change was 11.56%.

Key Economic Indicators

Find below the key economic indicators for your perusal:

  MAR-18 JUN-18 SEP-18 DEC-18 MAR-19
Exchange Rate (₦/USD)          
Official 305.65 305.75 306.35 307.00 309.65
Parallel 362.50 363.00 361.00 364.00 361.50
Monetary Policy Rate (MPR) % 14 14 14 14 14
Inflation Rate          
12-Mth Ave (%) 15.60 14.37 13.16 12.78 11.56
Year-on-Year (%) 13.34 11.23 11.28 11.44 11.31
Foreign Reserve (Billion USD) 46.04 47.63 44.38 43.19 44.34
Crude oil Price in the Int’l Market ($/barrel) 69.02 79.23 82.88 53.80 68.39
GDP Growth Rate 1.95% 1.50% 1.81% 2.38% 2.38%
NSE-ASI 41,504.51 38,278.55 32,766.37 31,430.50 31,041.42
NSE 30 1,874.27 1,739.08 1,473.63 1,417.15 1,392.65
NSE PENSION INDEX 1,584.56 1,490.07 1,226.16 1,207.46 1,188.02
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  as at 31st March, 2019 stood as follows:  

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

Quoted Equities 27%, Government Securities 50%, Money Market 22%, Others 1%. The NLPC PFA – RSA Fund I opened with a unit price of N0.9799 in January 2019 and grew to N1.0083 as at 31st March, 2019 translating to year to date growth of 2.90% and an annualized return of 11.75%.

NLPC PFA - RSA Fund II

As shown above, the asset allocation which is in compliance with PenCom’s investment regulation and guidelines, stood as follows; Quoted Equities 10%, Government Securities 65%, Money Market 18% and Cash & Others 7%. The unit price grew from N3.5738 in January, 2019 to N3.6790 as at 31st March, 2019 translating to a year to date growth of 2.94% and an annualized return of 11.94%.

NLPC PFA - RSA Fund III

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

Quoted Equities 5%, Government Securities 68%, Money Market 25% and Cash & Others 2%. The unit price grew from N1.0481 in January, 2019 to N1.0788 as at 31st March, 2019 translating to a year to date growth of 2.93% and an annualized return of 11.88%.

NLPC PFA - RSA Fund IV

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

Quoted Equities 3%, Government Securities 71%, Money Market 24% and Cash & Others 2%. The unit price grew from N3.0398 in January, 2019 to N3.1377 as at 31st March, 2019 translating to a year to date growth of 3.22% and an annualized return of 13.06%.

Outlook & Strategy

The economy is expected to gain steam in Q2, 2019 on the back of stronger household consumption and infrastructure investment growth. The growth is also predicated on quick passage and effective implementation of the 2019 budget, foreign exchangemarket stability, Federal Government initiatives targeted at improving the business environment & developing Nigeria’s industrial sector as well as favorable crude oil prices. Although healthy crude oil production will continue to support growth, lower crude oil prices represent a key downside risk to the outlook, as it can both dent vital foreign exchange earnings and place public finances under more strain. Other downsides are but not limited to: low level of lending by the commercial banks to the real sector of the economy and general securities issues.

3.20 The downward movement in the stock market in the period under review can be attributed to elevated political risk which led to sell-off by foreign and domestic investors. Meanwhile, having put all the elections behind us, the elevated political risk has beencut to size, we expect the stock market to close positive in Q2,

  1. 2019. This being the case, 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.

3.30 Lastly, we expect a reduced yield environment in the fixed income market in Q2, 2019 due to slowdown in inflation, aftermath effect of cut in MPR, stable exchange rate, amongst others. 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.

3.40 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 31ST DECEMBER,2018
ASSET CLASS MARKET VALUE(N'MLN) WEIGHT(%)
GOVERNMENT SECURITY 36.208 50
MONEY MARKET 16.260 22
EQUITIES 19.386 27
OTHER 0.508 1
TOTAL 72.362 100
NLPC PFA-RSA FUND II ASSET ALLOCATION AS AT 31ST DECEMBER,2018
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 64.702 69
MONEY MARKET 13.465 18
EQUITIES 9.148 10
OTHER 6.181 7
TOTAL 93.495 100
NLPC PFA-RSA FUND III ASSET ALLOCATION AS AT 30TH SEPTEMBER,2018
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 53.679 68
MONEY MARKET 15.427 25
EQUITIES 3.730 5
OTHER 2.044 2
TOTAL 76.880 100
NLPC PFA-RSA FUND IV ASSET ALLOCATION AS AT 30TH SEPTEMBER,2018
ASSET CLASS MARKET VALUE(N'BLN) WEIGHT(%)
GOVERNMENT SECURITY 23.309 71
MONEY MARKET 6.543 24
EQUITIES 0.886 3
OTHER 0.565 2
TOTAL 31.303 100
Number of RSA Holders: 282,567