Investment Strategies and Fund Performance of selected Pension Fund Administrators in Lagos State Nigeria

 ABSTRACT

Pension Funds Administrators take investment decisions and apply investment strategies in order to meet the various needs of retirees. The process of selecting investment is a complicated one, but funds which are invested on behalf of potential retirees must follow the line of the best and appropriate investment strategy to enhance security and ensure positive performance. Wrong investment decision, poor assessment of pension liabilities, insufficient funding arrangements, non-preservation of benefits, inadequate safeguard of the funds to guarantee prompt payment of pension and other benefits to retirees and serious structural problems were the major concern of pension management in Nigeria. This study investigated and evaluated the effect investment strategies on fund performance of selected Pension Fund Administrators in Lagos State Nigeria.

The study adopted survey research design. The target population of the research consisted of 469 professional employees from the selected pension fund administrators (PFA) because they understand the concepts of the different investment strategies. Yamane’s sampling formula was used to arrive at a sample size of 335 and simple random sampling technique was adopted. A structured questionnaire was administered and returned with 100% response rate. The Cronbach alpha reliability for the major constructs ranged between 0.77 and 0.94. The data gathered was analyzed using simple linear regressions analysis.

The findings revealed that there was a significant relationship between Investment Strategies and Fund Performance. All the investment strategies variables significantly affected fund performance. Investment style had significant effect on fund performance (R=0.291; R² = 0.084; p=0.000), Asset allocation had significant effect on fund performance (R=0.810; R² = 0.656; p=0.000), Risk profile had significant effect on fund performance (R=0.216; R² = 0.047; p=0.000, Regulatory influence had significant effect on fund performance (R=0.169; R² = 0.029; p=0.002).

The study concluded that Investment strategies of the pension fund administrators (PFAs) had significant effects on fund performance and that excellent fund performance is largely dependent on the investment proficiency of pension fund administrators (PFAs) as well as the investment strategies adopted. It was recommended that models need to be constructed and experiences need to be streamlined to assist in the evaluation of investment decisions deployed on pension funds.

Keywords: Pension Funds, Investment Strategies, Fund Performance, Investment Style, Asset Allocation, Risk Profile, Regulatory Influence.