A survey by AVCA in collaboration with the Pension Fund Operators Association of Nigeria (PenOp) has found most pension fund managers have a preference for investment in Private Equity (PE) though, in reality, only a handful of the investment fund, represented by 0.29% gets into PE business.
According to the survey which looks into pension funds and private equity in Nigeria, 75% of the Pension Fund Managers that participated in the survey plan to accelerate or maintain their current pace of capital commitments to African PE. In contrast to this, latest report by PenCom as at September 2021 shows that PE accounts for N36.7 billion of the total N13 trillion assets under management.
Similarly, the survey highlighted that this is not unconnected to challenges such as weak exit climate and unpredictable exit windows, lack of information on market, a lack of regular, industry-specific and transparent reporting amongst other factors inhibiting investment boost in PE. Highlights of the report
Close to two-thirds (63%) of Pension Fund Managers that participated in the survey currently manage less than US$999 million of pension assets.
Just under half (44%) of Pension Fund Managers that participated in the survey currently manage pension assets valued between US$500 million and US$999 million, while another 31% manage between US$1 billion and US$4.9 billion of pension assets.
88% of survey respondents have an exposure to Private Equity Funds and Infrastructure Funds, while 75% have an exposure to Real Estate Funds. Importantly, the vast majority of survey respondents (94%) do not currently have an exposure to Venture Capital Funds, further emphasizing this conservative approach.
Four in five of survey respondents currently have capital commitments to private equity in Nigeria. This means that the value of these commitments, slightly over two thirds (69%) of respondents have committed between US$1 million and US$20 million to Nigerian private equity as larger ticket sizes (US$21 million and above) are concentrated in national and regional markets only.
What this means
Despite expansions to the regulation of pension fund assets and the growing capital base at their disposal, pension investment in alternatives remains fairly muted but increasing interest in the asset class underscores the need to analyse the perceptions and concerns of institutional investors to promote an open dialogue on Africa’s unique business environment.
Although pension funds have been permitted to invest in private equity and venture capital since December 2010, none of the survey respondents is either currently invested or has previously invested in any Afro-centric (i.e. Africa focused) VC Funds, a relatively under-explored asset class while a significant majority of respondents (81%) are currently invested in private equity vehicles domiciled in both Nigeria and elsewhere on the continent.
Nigerian pension funds, which cumulatively held assets amounting to N13 trillion across all fund types in September 2021, have a decent amount of capital at their disposal with which to invest
The growing value of pension assets has increased the pool of domestic capital available to indigenous fund managers in Nigeria, although only 0.29% of the value of Nigerian pension funds have been allocated to private equity,
