Real estate performance in Nigeria pension fund
| DOI | https://doi.org/10.1108/JPIF-02-2018-0009 |
| Pages | 454-465 |
| Date | 17 July 2018 |
| Published date | 17 July 2018 |
| Author | Obinna Lawrence Umeh,Al-ameen Ayoade Okonu |
| Subject Matter | Property valuation & finance,Real estate & property |
Real estate performance in
Nigeria pension fund
Obinna Lawrence Umeh and Al-ameen Ayoade Okonu
Department of Estate Management, University of Lagos,
Lagos, Nigeria
Abstract
Purpose –The purpose of this paper is to examine the contribution of real estate to the performance of
mixed-asset portfolio of Nigeria Pension Fund with a view to providing a guide on investment decision
making for institutional investors and portfolio managers.
Design/methodology/approach –Data on capital value were collected from the quarterly and annual
reports of Nigeria Pension Commission over a period of ten (2007–2016) years, and the data were analyzed
using descriptive statistics.
Findings –The findings show that there is diversification benefit resulting from integrating real estate to
other assets of the Nigeria Pension Fund, and that the fund’s portfolio performed better when real estate is
integrated in the mixed-asset portfolio.
Practical implications –Investment portfolio managers can benefit from the findings of this study by
making investment decisions that are performance-driven. The study will serve as a guide in making
investment decisions on mixed-asset portfolio of institutional investors other than pension funds.
Originality/value –There is no known paper on the contribution of real estate in the performance of asset
portfolio of the Nigeria Pension Fund.
Keywords Performance, Nigeria, Real estate, Portfolio, Pension fund, Mixed asset
Paper type Research paper
1. Introduction
In the recent times, pension is increasingly attracting attention of policy makers in many
countries as a means of facilitating privately funded retirement income savings by an
ageing workforce (World Bank, 1994); and pension funds are now among the most
important institutional investment in the World Capital Markets (Klumpes and Mason,
2000), as cited in Odia and Okoye, 2012).
In Nigeria, pension funds are still in their embryonic stage as evidenced by PENCOM
report that the Nigeria pension industry is growing at an annual rate of 25 percent since the
introduction of the Contributory Pension Scheme in 2004. Though Nigeria has a working
population of 69,470,901 (Q4, 2016), only 7,589,936 which represent 10.93 percent of the
working population are currently involved in the scheme as at second quarter of 2017
(NBS, 2017). As at the first quarter of 2016, there is about 3tr naira untapped pension fund,
which are expected to be diversified into real estate, infrastructure and other key aspects of
the real economy (Anohu-Amazu, 2016).
The diversity of investment has created the problem of investments to select by
investors. The problem of investments to select is one of the fundamental problems of
investment decision making (Hargitay and Yu, 1993, as discussed in Olaleye, 2008). The
problem of selecting investments here is not limited to selection of investments that will be
combined to make up the portfolio but includes the appropriate proportion of each
investment to combine to make the selection worthwhile. The peculiar advantages of real
estate qualifies it as an asset class to be combined with other assets to achieve optimum
portfolio returns (Emele and Umeh, 2013). This submits that if investments in real estate are
appropriately selected and combined with other investments within a mixed-asset portfolio,
the mixed-asset portfolio will perform better.
However, the characteristics of real estate as well as the emerging nature of
contributory pension scheme in Nigeria calls for an inquiry to ascertain the contribution of
Journal of Property Investment &
Finance
Vol. 36 No. 5, 2018
pp. 454-465
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-02-2018-0009
Received 4 February 2018
Revised 11 March 2018
Accepted 11 March 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
454
JPIF
36,5
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