What are the major global events currently impacting Emerging Markets Pension markets?
Slowing Global Growth: Unstable oil prices, the impending trade war between the United States and China and uncertainty in Europe due to Brexit have combined to impact forecasts for global growth. The World Bank and IMF have already reviewed downward their forecasts for global growth in 2019. A slowing global economy would impact stock markets especially those in emerging markets as uncertainty would drive investors to the safety of their home markets. Oil prices are expected to trend lower and average about $61 in 2019 according to forecasts. This would significantly impact the ability of economies dependent on oil revenues such as Nigeria to embark on infrastructure and social development. Dwindling reserves in economies such as Nigeria, would affect the ability of Nigeria to defend the Naira and attract portfolio investors, thereby reducing liquidity in the stock and bond markets.
Interest rate increases in United States: Though the Federal Reserve had indicated its intention to halt rate increases in 2019, previous rate hikes by the Federal Reserve has led to US investors moving out of emerging and frontier markets such as Nigeria. This had a significant impact on stock markets as well as the bond markets. The reaction by Governments has been to increase yields on sovereign debt. Though beneficial for pension fund portfolios in the short to medium term, the long-term implication is the ‘crowding out’ of other issuers in the fixed income space. This has already started to impact on the ability of pension managers to achieve optimal diversification of pension portfolios.
Where do you see the major risks for Pension funds in the next 5 years?
Where do you see major opportunities for pension investing in the next 5 years?
Where do you see a major sell-off or buy-up trend occurring in Pension funds over the next few years?
The reduction in fixed income securities is expected and increase in investment in variable income instruments and alternative asset classes. To achieve this, multi fund structure was introduced in Nigeria to match contributor risk appetite with the level of variability in the investment portfolio.
Where in your opinion are Pension fund investors currently getting it wrong?
There is high concentration in fixed income securities due to relative high yields on sovereign debt.
Short term outlook is driving the investment practices of most pension funds.
What would you say is the role of PIAfrica conference for you on the above?
The conference would provide an opportunity to share understanding about the investment activities of pension funds and the impact of these investments in the development of local economies across the emerging market space.
It would also provide a platform to discuss the outlook of pension fund investments and the likely focus areas and the associated risks.
How this conference will help you achieving these objectives?
Knowledge sharing and opportunity to interact with professionals from different jurisdictions to share experiences and exchange ideas.
What outcomes would you expect from the conference?
Better understanding of the operating environments of pension funds and their associated challenges.
Policy direction on how pension funds should invest their collections to facilitate the development of emerging markets capital markets and bridge the infrastructure gap.