How Do Investments in Financial Assets Affect the Financial Performance of Pension Firms? Evidence from Nigeria
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Date
2025
Journal Title
Journal ISSN
Volume Title
Publisher
Revista Científica Profundidad Construyendo Futuro
Abstract
Pension Fund Administrators (PFAs) are essential for the management of pension funds that “guarantee retirees’
comfortability and welfare after life of active service years. The PFAs constantly encounter problems associated with
investment decision making and optimization of financial performance of their invested assets classes to provide good returns
for the payment of pension benefits. This paper analyses the impact of investment securities on the financial performance of
pension funds in Nigeria. We considered a theoretical construct that demonstrate how assets holding drives the financial
performance of pension funds. We examine each security invested in the portfolio of the PFAs – money market securities
(MMS), federal government securities (FGS), mutual funds (MTF) and private equity fund (PEF) – incentivize return on
investment (ROI) of the PFAs. We applied the autoregressive distributive lag on published information of National Pension
Commission covering 2007 to 2021. The findings revealed that investment in money market securities have a positive impact
on short-term ROI (10.223, p value < 0.01) but a negative impact in the long run (-10.798, p < 0.01). Investment in FG security
does not significantly affect ROI in either the short run or long term. Private equity fund investments exhibit no significant
short-term impact but positively influence long-term ROI (1.460, p< 0.01). The mutual fund investments negatively impact
short-term returns (-1.054, p< 0.01) but have a positive effect on long-term ROI (1.463, p< 0.01). This suggest that the money
market securities yield short-term gains, while the private equity and mutual funds indicates a potent long-term investment
tool for long-term growth. However, the FG securities appear not to show a significant influence on financial performance.
This outcome, evidently, underscores the need for policy and regulations to investment make the PFAs more strategically
position to improve retirees’ welfare. We offer that the PFAs should ensure more investment in money market assets with
effective switching strategies, to target potential short-term gains, manage long-term risks by promoting mutual funds and
private equity funds investments for improved long-term performance and” ensure portfolio diversification to include
securities may guarantee sustainable long-term returns.