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World’s Biggest Pension Fund Loses $51 Billion

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Japan's Pension Fund Reports Record $64B Loss

The world’s biggest pension fund posted the worst annual performance since the global financial crisis, with losses exacerbated by unfavorable currency moves and a foray into equity markets.

Japan’s $1.3 trillion Government Pension Investment Fund lost 3.8 percent in the year ended March 31, or 5.3 trillion yen ($51 billion), the retirement manager said Friday in Tokyo. That’s the biggest drop since the fiscal year ended March 31, 2009. GPIF lost 10.8 percent on domestic equities and 9.6 percent on shares in other markets, while Japanese bonds handed the fund a 4.1 percent gain.

The annual loss — GPIF’s first since doubling its allocation to stocks and paring domestic bond holdings in October 2014 — came during a volatile stint for markets. Japanese shares sank 13 percent in the year through March while the yen climbed 6.7 percent against the dollar, reducing returns from overseas investments. The only asset class to post a profit was local debt, which jumped in value as the Bank of Japan’s adoption of negative interest rates sent yields tumbling.

“The results are painful,” said Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Because it’s a pension fund, they need to have a long-term outlook, so I don’t think we can say yet that they took on too much risk. It was a harsh investment environment for most of us.”

In a press briefing in Tokyo after the results were announced, GPIF President Norihiro Takahashi said he will reflect on the performance, but that the current portfolio has enough flexibility to adapt to different market conditions and he wants to run the fund steadily. Yoshihide Suga, Japan’s chief government spokesman, said GPIF’s management shouldn’t be influenced by short-term moves and there is absolutely no issue with its financing.

The fund also disclosed individual stock holdings and the issuers of the bonds it held as of March 2015, the first time it’s divulged such detail. GPIF’s biggest investments in stocks were Toyota Motor Corp. and Mitsubishi UFJ Financial Group Inc. in Tokyo and Apple Inc. outside Japan. The fund’s largest debt holdings included Japanese government bonds and U.S. Treasuries. GPIF plans to announce its holdings as of March this year on Nov. 25, and is staggering the releases to avoid impacting markets, fund official Hiro Mitsuishi said on Monday.

Asset Weightings

GPIF held 22 percent of investments in local stocks at the end of March, and 38 percent in domestic bonds. Its overseas equity holdings made up 22 percent, while foreign debt accounted for 13 percent of its assets. Alternative investments were 0.06 percent of holdings, up from 0.04 percent at the end of 2015. GPIF targets allocations of 25 percent each for Japanese and overseas stocks, 35 percent for local bonds and 15 percent for offshore debt.

“They have more than enough room to increase their weighting to Japanese stocks,” said Makoto Sengoku, a market analyst at Tokai Tokyo Research Center.

Almost 80 percent of GPIF’s holdings were passive investments, according to the statement. While GPIF’s losses can be mostly attributed to rocky markets and an index-hugging investment approach, its peer in Canada has done better. The $212 billion Canada Pension Plan Investment Board had a 3.4 percent return for the year ended March, with its biggest gain coming from private emerging-market equity investments and real estate.

Losses Expected

Investors “have been fully aware that there would be losses,” Akio Yoshino, chief economist at Amundi Japan Ltd. in Tokyo, said before the fund posted earnings. “What’s more interesting is how this will be used politically, or even misused.”

GPIF’s performance was announced three weeks later than usual, sparking speculation Prime Minister Shinzo Abe was holding off on releasing bad news until after upper-house elections held earlier this month. Opposition lawmakers have been critical of Abe’s decision to increase riskier assets, with the Democratic Party of Japan pledging to return GPIF’s investments to safer assets in its election manifesto.

“We’ve repeatedly pointed out that it’s problematic to invest in stocks, which are high-risk, but the situation is turning into what we feared,” DPJ President Katsuya Okada said in a press conference on July 1. “It’s a grave problem that could lead to reductions in future pensions.”

Investors, however, say GPIF should stay the course.

“They took on more risk, and they posted good returns before, but there’s going to be times when they see losses,” said Koichi Kurose, Tokyo-based chief market strategist at Resona Bank Ltd. “It can’t be helped.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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MTN Nigeria Joins FG Delegation at the 2021 Edition of UNIIS to Woo investors!

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Karl O Toriola - Investorsking.com

MTN Nigeria is participating at this year’s edition of the US-Nigerian Investment Summit scheduled to hold on the 17th and 18th of September, 2021 in New York City. The participation is in furtherance of the company’s  commitment to partner with the Federal Government,  through the  Ministry of Industry, Trade and Investment, to attract investors and investment to Nigeria.

Themed “Nigeria: The Future of Global Business”, the event builds on the success of the 2018 maiden edition. The Chief Executive Officer, MTN Nigeria, Olutokun Toriola as well as Chief Financial officer, MTN Nigeria, Modupe Kadiri will be in attendance at the summit. Toriola will be speaking at the summit, highlighting opportunities in Nigeria with MTN Nigeria’s success story as a reference.

“We are passionate about the development of our economy. This can be seen in our unrelenting efforts in working with   Government and institutions in different sectors to advance economic growth in our nation. We believe in the many opportunities Nigeria avails investors, and our 20 year journey is a testament to the promise the country holds,” said Toriola.

The US-Nigeria Investment Summit plays a vital role in attracting and facilitating business investment and job creation by raising awareness about a range of opportunities, and enabling vital direct connections between investors and the Nigeria economy. The investment summit features senior government officials, C-Suite business executives, and other thought leaders.

MTN Nigeria continues to advance its Good Together philosophy through strategic interventions, working  with the people and government of Nigeria. Recently, the company announced a series of activities as part of its milestone anniversary celebration including participating in the Road Infrastructure Tax Credit Programme (RITC) for an opportunity to reconstruct the Enugu – Onitsha expressway in South-Eastern Nigeria, building a world-class campus in Nigeria and selling down up to 14% of its equity to Nigerians.

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SEC In plans To Embrace Crypto Investment, Set Up Fintech Unit For Regulations

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Nigeria SEC- Investors king

The Securities and Exchange Commission (SEC) has set up a fintech division to study crypto investments and products in order to come up with regulations, the Director-General of the commission, Lamido Yuguda said on Thursday.

“We are looking at this market closely to see how we can bring out regulations that will help investors protect their investment in blockchain,” Yuguda was reported to have said by Reuters in a virtual interview in Abuja.

He did not provide a time frame for issuing regulations but said the SEC will step in with regulations once crypto is allowed within the Nigerian banking system.

The SEC has sought to regulate crypto on the grounds that they qualify as securities transactions.

Nigeria is one of the biggest markets for crypto trading, but in February the Central Bank of Nigeria (CBN) banned banks from transacting or facilitating deals in cryptocurrencies.

The use of bitcoin, the original and biggest cryptocurrency, has boomed in Nigeria in recent years, driven by payments from small businesses and a weakening naira currency, which makes it difficult to get the U.S. dollars needed to import goods or services.

Yuguda said the commission has been in talks with the CBN, part of which led to the plan by the regulatory bank to launch the country’s digital currency, e-naira.

The commission is seeking to work with fintech firms to boost the marketing of domestic securities to prevent capital flight.

The central bank this month blocked the accounts of six firms for allegedly sourcing funds from illegal foreign exchange operators to buy foreign securities and cryptocurrencies.

He said the SEC is looking to boost savings through investment schemes, which currently have over N4 trillion under management split between public and private fund managers.

Yuguda said the regulator has asked private managers to put in place custody arrangements to protect investors.

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In 4 Years 92 Percent Of Investment Opportunities Lost in Nigeria

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Within the period of 2017 and 2020, Africa’s largest economy, Nigeria has lost over 92 percent of investment available to the country. The loss in investment sums up about $188.29 billion.

According to the report of the Nigerian Investment Promotion Commission (NIPC) on “Investment announcements versus FDI (Foreign Direct Investments) Inflow in Nigeria, 2017 – 2020” the discrepancies between the FDI announcement and actual FDI inflow were revealed. The commission stated that the actual inflow of FDI into Nigeria was 7.65 percent of the total FDI announcements.

This is an affirmation that the FDI announced by the commission did not materialize or translate to actual investment inflow.

In the period 2017 to 2020, the NIPC FDI announcement stood at $203,89 billion, however, the actual FDI within the same period was $15.6 billion and unmaterialized FDI announced was $188.29 billion.

In 2017, statistics obtained from NIPC revealed a total of $66.35 billion FDI announcement but only $3.5 FDI inflow was recorded. For 2018, 2019 and 2020, $90.89 billion, $29.91 billion and $16.74 billion FDI were announced in each year respectively. However 2018 FDI inflow was $6.4 billion, 2019 inflow was $3.3 billion and 2020 FDI inflow was $2.4 billion.

With this report, the commission asserted that its report was based solely on Investment announcements which may not contain exhaustive information on all investment announcements in the country within the said period.

According to NIPC, the gaps between announcements and actual investments demonstrate investments potentials that were not fully actualised.

The Commission stated: “A more proactive all-of-government approach to investor support, across federal and state governments, is required to convert more announcements to actual investments.”

Reacting to the situation, Director General, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Ambassador Ayoola Olukanni, noted that the gap may not be unconnected to the economic recession and COVID-19 pandemic events within the period, aggravated by policy instability.

Olukanni stated: “Numerous studies have established that Foreign Direct Investment is dependent on the market size of the host country, deregulation, level of political stability, investment incentives, openness to international trade, economic policy coherence, exchange rate depreciation, availability of skilled labour, the endowment of natural resources and inflation.

“You will agree with me that the four years spanning 2017 and 2020 are characterized by the struggle to exit from economic recession, a period of slight recovery, the COVID-19 pandemic, and another period of recession. These circumstances may or may not be responsible for the political and economic reaction that can be witnessed in the uncertainty in the foreign exchange market, increased inflation, increased unemployment, increased political unrest and insecurity and so on.

“What can be established is that Foreign Direct Investment is averse to risk and uncertainty, especially the kind of uncertainty brought about by policy instability and economic policy. An obvious example is the closure of the land borders in 2019, while justifiable through the lens of national security is certain to have a negative impact on Foreign Direct Investment which has a long-term planning horizon.

“In summary, to seek to increase actual FDI is to promote the factors that have been shown, empirically, to positively impact FDI. While the Nigerian economy checks the boxes of most of these factors, economic policy coherence, foreign exchange market stability and insecurity are issues that are currently the bane of FDI inflows.”

Also commenting, an economist and private sector advocate, Dr. Muda Yusuf, who is also the immediate past Director-General of Lagos Chamber of Commerce of Industry (LCCI), said the development reflects the low level of investors’ confidence occasioned by structural problems of infrastructure and worsening security situation.

His words: “It is investors’ confidence that drives investment, whether domestic or foreign. Investors are generally very cautious and painstaking in taking decisions with respect to Foreign Direct Investment (FDI). This is because FDIs are often long-term and invariably riskier, especially in volatile economic and business environments. Uncertainties aggravate investment risk.

“Investors in the real sector space are grappling with structural problems, especially around infrastructure. There are also worries around liquidity in the forex market; there are concerns about the accelerated weakening of the currency. There are issues of heightened regulatory and policy risks in many sectors.

“Investors’ confidence has also been adversely affected by the worsening security situation in the country. Meanwhile, the economy is still struggling to recover from the shocks of the COVID-19 pandemic. These are the likely factors impacting investment decisions.

“Our ability to attract FDI will depend on how well we position ourselves. The critical question will be around expected returns on investment. Overall, it is the investment climate quality that will make the difference. We need to ensure an acceleration of necessary reforms to make Nigeria a much better investment destination. We need policy reforms, regulatory reforms and institutional reforms, among others.

“We should accelerate the ongoing foreign exchange reforms; we need to undertake trade policy reforms to liberalise trade in sectors of weak comparative advantage; we need regulatory reforms to make regulations more investment-friendly. We need to create new opportunities in the public-private partnership (PPP) space, especially in infrastructure. We need to see more privatization of public enterprises.

“It is important as well to quickly fix the ravaging insecurity in the country. All of these are crucial to boost investors’ confidence.”

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