June 18, 2018

PFAs multi-fund investment structure good, but compliance may lag — Kurfi

PFAs multi-fund investment structure good, but compliance may lag — Kurfi

•Mallam Garba Kurfi, Managing Director, APT Securities

Mallam Garba Kurfi, is the Managing Director/CEO, APT Securities and Funds Limited. In this interview, he said that faithful implementation by the Pension Fund Administrators, PFAs, of the multi-fund investment structure approved by the Pension Commission, PenCom, will impact the equities, but doubt the ability of the PFAs to fully comply with the rule due to the observed past failures.

By Nkiruka Nnorom

THE Pension Commission, PenCom, recently announced intention to commence implementation of Retirement Savings Account, RSA, multi-fund investment in variable instruments. How do you think this will impact the equities market?

If it is successfully implemented, it will be good for the stock market because before now, we had just two funds – the Retiree Account, RA, Fund and Retirement Savings Account, RSA Fund.

•Mallam Garba Kurfi, Managing Director, APT Securities

In Retiree Fund, the maximum you can invest in equity is 10 percent, while in RSA Fund, which is the major Fund, the maximum that could be invested is 25 percent, but once they go into the multi-fund investment structure, PFAs will be allowed to invest as much as 70 percent of one of the Funds into equities.

Question of implementation

So, to me, the multi-fund investment structure is better and the capital market will be better for it. By the time they start implementing it, a lot of things will change, but the problem still lies in implementation. Even now in the RSA Fund that the PFAS are permitted to invest up to 25 percent, quite a number of them are investing less than 10 percent.

So, the question is not the rule, it is a question of implementation. Are they capable enough to implement it? The answer I will tell you is no because the PFAs have so much fear in investing in equities. Let me tell you, for the past three years, APT Pension Fund has been the number one in terms of return because we play in the capital market very well.

The rule is good, but are the operators willing to invest in the equity market? The answer I will tell you is no. They know the rule but the capacity to implement it is what is lacking.

After a protracted period of bearish run, the bulls finally resurfaced this week broadly in line with expectation. For how long do you think the market would sustain the fresh rebound?

Let me tell you, if you know how to play the market as an investor, the better for you. As at May 31, Japaul Oil and Maritime Services was 21kobo, it traded as low as 20kobo. Today (Thursday, June 7), it is 29kobo and that gives almost 40 percent return. Can you imagine that Japaul can give you 40 percent return in one week? Dangote Flour Mill was trading as low as N8.90, but today, it is trading at over N10.00. Look at Nigerian Breweries, it traded for as low as N99.00, but today, it trades at N118.00. Lafarge Africa traded for as low as N33.00. Today, it is N39.00. So, it depends on how you play the market. If you play well, you will make money.

So, fundamentally, there is nothing wrong with the market. Most of the stocks have good fundamentals but they are trading below their fair value. Secondly, there is stability in the foreign exchange. So, foreign investors that want to play the market are invited to do so. What we are seeing now is simply uncertainty relating to the election period and that is normal.

When there is election approaching, it creates uncertainty, but once all the parties have declared their presidential candidate, things will become more clearer to investors and they will be able to decide whether to invest or not to invest.

Simple speculation

For now, it is simple speculation because it is only President Muhammadu Buhari that investors know as a presidential candidate. We don’t know the other candidates that are contesting with him, but by August ending when the political parties’ primaries are over and other parties declare their candidates, we will begin to see changes.

Investors, therefore will be more confident to predict what the likely outcome of 2019 election will be. So, to me, I believe the up and down movement will continue tentatively until after the parties primaries, probably in August.

Is there is still the possibility of the market posting a high double digit return this year?

I just mentioned that recently many of these stocks recorded massive gains even within one week, but whether the market will post a double digit return at the end of the year will depend on the outcome of the parties’ primaries since this year not an election year.

We have seen moments of ups and downs, but I still believe that we are likely going to close in the positive, but I cannot readily say if we are going to make double digit or not. I foresee that we are likely going to close positive because fundamentals of the companies are right and they are not doing badly.

So, what will be your advise to, especially, domestic retail investors?

Let them ‘shine their eyes’ and take position because you can see the level of increase recorded in some of the stocks I listed in just one week. So, let them go for trading because up and down movement gives room for investors to make money.