Managing Director/Chief Executive Officer of Sigma Pensions, Mr. Dave Uduanu, in this interview talks on challenges of investing part of the pension fund in infrastructure. Excerpt.
By Rosemary Onuoha
THERE have been various calls from different quarters for part of the pension fund to be invested into infrastructure, what is your take on this?
Pension Fund Administrators, PFAs, are keen on investing in infrastructure but can only invest in investible infrastructure instruments that can guarantee their retirees’ funds. The major challenge with diversification of pension fund is unavailability of investment instruments. One of the key channels we could invest in as a means of diversifying the portfolio is infrastructure, however, infrastructure is not investible.
When we say it is not investible, it means we don’t have instruments through which we can invest in infrastructure, get a good return and get the money back. So the real question with the PFAs is, how do you create diversification in a market where the capital market is shallow? Also, the only person borrowing is the government, while the companies as well as the corporates are afraid of coming to us to borrow because our standards are high, much higher than the banks.
The central thing holding back corporate bonds in Nigeria is corporate governance. So a lot of the companies are not interested in opening their books to investors to scrutinize and until we address the issue of corporate governance, as well as transparency, we would not see the instruments that will create diversification opportunities for pension funds.
You recently brought stakeholders together in a roundtable to discuss the issue, what informed that decision?
The roundtable is the first in the series of thought leadership that Sigma Pensions is putting in place to discuss key issues within the investment space in Nigeria. We are one of the five biggest PFAs in Nigeria as we manage money for a lot of people and they often wonder what their money is going into but more importantly how do we create value for our customers. The conference is to highlight the macro risks that the country is facing as a build up to the elections in spite of the high oil prices.
The second was on private equity which we think is quite germane because the banking sector is starved of capital, they are not lending anymore and the other sources of capital are pension funds and insurance companies, but according to our regulations, the only way we can invest in the real sector is through private equity fund. So we thought we should discuss the challenges of investing in private equity, bring some experienced practitioners in the industry to the roundtable to discuss and articulate ways that we can increase the penetration of pension funds in private equity.
What are the takeaways from the roundtable?
The first takeaway is that it was well received. The second is that we should do more because oftentimes people think everyone knows what the issues are but they actually don’t. But more importantly, is the fact that we have started a conversation between the pension fund and the private equity that will lead to more investment of pension fund in private equity and more investment of private equity in Small and Medium Enterprises, SME, and growing companies.