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Fund Manager's Report


FUND MANAGERS’ REPORT AS AT 31ST DECEMBER, 2018

The Nigeria’s PMI posted 61.1 in Q4’ 2018 (which is significantly above 50 expansion threshold). The index grew at a faster rate when compared to the index in the previous quarter 56.2. The expansion was as a result of faster growth in Production level, new orders, Supplier deliveries, Inventories and Employment level in the period under review.

Also, the Nigeria’s Gross Domestic Product (GDP) grew by 1.81% (year-on-year) in real terms in Q3’ 2018. Growth in Q3’ 2018 was 0.64% points higher when compared to Q3’ 2017 which recorded a growth of 1.17%, and 0.31% points faster than 1.50% recorded in the second quarter of 2018. On a quarter on quarter basis, real GDP growth was 9.05%.

The Nigerian Bureau of Statistics (NBS) released the Consumer Price Index (CPI) report for November, 2018 where Headline Inflation for November - measured Year-on-Year (Y-o-Y) – increased to 11.28% with a 12-month average of 12.78%. The increase was as a result of high base effects over 2017 prices. On to governance updates, Federal Government plans to spend about N42bn for the rehabilitation of special economic zones established to drive manufacturing and export of Nigerian products in the 2019 fiscal period, as captured in the 2019 budget proposal presented by President Muhammadu Buhari. The budget has an estimate of N8.83tn, made up of N4.04tn for recurrent expenditure, N2.03tn for capital expenditure and N2.14tn for debt servicing, among others.

Financial Market Update

The stock market lost 4.08% in Q4’ 2018 to close the period at 31,430.50 when compared with Q3’ 2018 where it closed at 32,766.37. Year- to-date (YTD), the stock market had plummeted by 17.81% The negative performance in the period under review were as a result of heightened political risk and sell-offs by profit takers as investors sentiment further dampened. 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 FGN Bond, 7-year FGN Bond and 10-year FGN Bond closing at 15.2500%, 15.5000% and 15.5000% respectively

The 10-year bond was oversubscribed depicting increased investors’ preference for longer-tenured government securities.

At the official segment of the FX market, the naira depreciated in Q4’ 2018 at N307.00/1$ when compared with its closed price of N306.35/1$ in Q3 2018. Also, the naira depreciated in the parallel market as it closed the period under review at N364.00/1$ as against N361.00/1$ in Q3 2018.

The monetary policy committee (MPC) met during the period under review and voted to maintain rates at status quo for the thirteen consecutive session. The latest official inflation rate as released by the Bureau of Statistics shows a 12 months average of 12.78% while the year-on-year change was 11.28%.

Find below the key economic indicators for your perusal:


DEC-17 MAR-18 JUN-18 SEP-18 DEC-18
Exchange Rate (₦/USD)
Official 306.00 305.65 305.75 306.35 307.00
Parallel 363.50 362.50 363.00 361.00 364.00
Monetary Policy Rate (MPR) % 14 14 14 14 14
Inflation Rate
12-Mth Ave (%) 16.50 15.60 14.37 13.16 12.78
Year-on-Year (%) 15.37 13.34 11.23 11.28 11.28
Foreign Reserve (Billion USD) 38.73 46.04 47.63 44.38 43.19
Crude oil Price in the Int’l Market ($/barrel) 66.20 69.02 79.23 82.88 53.80
GDP Growth Rate 1.40% 1.95% 1.81% 1.81%
NSE-ASI 38,243.19 41,504.51 38,278.55 32,766.37 31,430.50
NSE 30 1,746.68 1,874.27 1,739.08 1,473.63 1,417.15
NSE PENSION INDEX 1,379.74 1,584.56 1,490.07 1,226.16 1,207.46
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

As shown above, the asset allocation which is in compliance with PenCom’s investment regulation and guidelines, stood as follows; Quoted Equities 29%, Government Securities 54%, Money Market 17%. The NLPC PFA – RSA Fund I opened with a unit price of N1.0000 on 2nd July 2018 and declined to N0.9799 as at 31st December, 2018 translating to year to date growth of -2.01% and an annualized return of -4.01% as a result of high exposure to variable income securities. We are optimistic that the negative return will reverse as the nation’s economy fundamentals improve.

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 69%, Money Market 14% and Cash & Others 7%. The unit price grew from N3.2554 in January, 2018 to N3.5738 as at 31st December, 2018 translating to year to date growth and annualized return of 9.78%.

The Asset Allocation of our NLPC PFA – RSA FUND III as at 31st December, 2018 stood as follows; Government Securities 72%, Money Market 20%, Equities 5% and Cash & others 3%.

The NLPC PFA – RSA Fund III opened with a unit price of N1.0000 on 2nd July 2018 and grew to N1.0481 as at 31stDecember, 2018 translating to year to date growth of 4.81% and an annualized return of 9.59%.

The Asset Allocation of our NLPC PFA – RSA FUND IV as at 31st December, 2018 stood as follows; Government Securities 74%, Money Market 21%, Equities 3% and Cash & others 2%.

The NLPC PFA – RSA Fund IV opened with a unit price of N2.7000 in January 2018 and grew to N3.0398 as at 31st December, 2018 translating to year to date and annualized return of 12.59%.

Nigeria faces a challenging economic environment in 2019 against the backdrop of weaker commodity prices, prolonged capital reversals, lukewarm investor sentiment and geopolitical uncertainty.Other key economic headwinds are probable currency volatility,restrained oil production, policy instability and severe fiscal strain due to excessive government spending. Despite these, we expect the Nigerian economy to grow in 2019 and project GDP of 2.2% y/y. This in our view will be driven by continued recovery in the non-oil sector (such as manufacturing, services and agriculture) as well as higher expected aggregate demand on the back of potential minimum wage hike coupled with the continued improvement in PMI.
The downward movement in the stock market continued in the period under review due to the activities of the profit takers, reduced domestic participation, exodus of foreign portfolio investors, heightened political risk and absence of catalysts that would have spurred long term investors’ interest. In effect, in 2019,we do not expect any significant improvement in the stock market before the election, we however expect significant improvement thereafter.

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 an elevated yield environment in fixed income market in 2019 due to rising global interest rates & consequent capital outflows, investors’ jitters caused by the elections, rising inflation and tightening monetary policy. Basically, we shall continue to explore strategies to take advantage of the fixed income market with strong focus 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 31STDECEMBER,2018
ASSET CLASSMARKET VALUE(N'MLN)WEIGHT(%)
GOVERNMENT SECURITY34.92454
MONEY MARKET10.95117
EQUITIES19.23917
OTHER19.23929
TOTAL65.114100


NLPC PFA-RSA FUND II ASSET ALLOCATION AS AT 31STDECEMBER,2018
ASSET CLASSMARKET VALUE(N'BLN)WEIGHT(%)
GOVERNMENT SECURITY64.70269
MONEY MARKET13.46514
EQUITIES9.14810
OTHER6.1817
TOTAL93.495100


NLPC PFA-RSA FUND III ASSET ALLOCATION AS AT 30THSEPTEMBER,2018
ASSET CLASSMARKET VALUE(N'BLN)WEIGHT(%)
GOVERNMENT SECURITY53.67972
MONEY MARKET15.42720
EQUITIES3.7305
OTHER2.0443
TOTAL76.880100


NLPC PFA-RSA FUND IV ASSET ALLOCATION AS AT 30THSEPTEMBER,2018
ASSET CLASSMARKET VALUE(N'BLN)WEIGHT(%)
GOVERNMENT SECURITY23.30974
MONEY MARKET6.54321
EQUITIES0.8863
OTHER0.5652
TOTAL31.303100


NO OF RSA HOLDERS: 278,183