Pension Funds Boost Real Estate Investments to N1 Trillion in 2023

Pension funds have invested a record N1 trillion in the real estate sector in 2023.

According to Oguche Agudah, CEO of the Pension Fund Operators Association of Nigeria (PenOp), this surge in investment shows the real estate sector’s viability as a strategic investment option for pension funds.

“Pension funds have consistently been investing in real estate and REITs over the past few years, and these investments provide a stable return and help diversify the pension fund portfolios,” Agudah said.

Real Estate Investment Trusts (REITs), which pool capital from investors to earn dividends from real estate assets, have been a significant beneficiary of this trend.

In 2023, N1 trillion out of a total Assets Under Management (AUM) of N18.36 trillion was channeled into real estate and REITs.

This is a notable increase from 2022, where N943.61 billion was invested from an AUM of N14.99 trillion.

The trend over the past few years shows a consistent commitment to real estate investments.

In 2021, N957.27 billion was invested from an AUM of N13.42 trillion, while 2020 saw N958.35 billion invested from an AUM of N12.31 trillion.

Going back to 2019, pension funds invested N972.83 billion out of an AUM of N9.58 trillion, marking one of the highest allocations to real estate and REITs.

Dave Uduanu, managing director and CEO of Access Pensions Limited, highlighted the attractiveness of real estate investments for pension funds.

“Pension managers are interested in investing in real estate, but it has to be well structured,” Uduanu said.

He said these investments provide competitive returns and help reduce Nigeria’s infrastructure deficit.

The regulatory landscape has also evolved to support greater investments in real estate. The regulation of equity contributions for residential mortgages, which began in December 2023, has facilitated more substantial investments in this sector.

Data from the first quarter of 2024 shows that 2,971 pension contributors via RSA have signed up for equity contributions for residential mortgages, with N29.2 billion already allocated.

Despite the significant allocation to real estate, a chief investment officer from one of Nigeria’s leading PFAs noted that there is still room for greater investment in infrastructure, including real estate.

“One thing we can do better is on visible impact. One way people can truly feel the tangible impact of their pensions is in the area of infrastructure investments, and real estate is key here,” the officer stated.

The growing investments in real estate by pension funds are a testament to the sector’s potential and the strategic vision of pension fund managers.