The Correlation of Investment Securities and the Returns of Pension Fund Administrators in an Emerging Economy
Loading...
Date
2024
Journal Title
Journal ISSN
Volume Title
Publisher
Ilomata International Journal of Tax and Accounting
Abstract
The pension fund administrators (PFAs) are saddled with the responsibility to manage and invest pension contributions on behalf of employees through investment in securities and the earnings from the investments. The PFAs are constantly faced with the problem of optimizing financial performance of assets to investin. The paper aims to access the connection between financial assets that the PFAs in Nigeria invest in and their investment returns. In line with theory, econometricsoffers correlationframeworks as a simple and efficient way to resolve and understand the relationship between financial assets and financial returns. We applied a Pairwise correlation approach to published information from the National Pension Commission (PENCOM) from 2007 to 2021to evaluate the link between four financial assets and investment returns. We find that two of the securities –money market securitiesand mutual funds –have a positive relationship with the PFAs’ returns, and the other two considered –the federal government securities and private equity funds –have a negative relationship with the PFAs’ returns. Only the correlation between the growth of investment return and investment in money market securities is moderate and significant. In contrast, othersare low and insignificant, thus leading us to refute the first hypothesis, maintaining others. The study offers insights into factors that affect their financial performance and investment strategies to be put in place to optimize return,which in turn will benefit their contributors. The outcome provides policymakers and regulators with a comprehensive overview of all investment securities and administrators' performance.