An empirical evaluation of the performance of Nigerian pension fund managers
African Journal of Economic and Management Studies
ISSN: 2040-0705
Article publication date: 8 April 2024
Abstract
Purpose
This paper evaluates the risk-adjusted returns, selectivity, market timing skills and persistence of the performance of Nigerian pension funds.
Design/methodology/approach
Annual return data of 23 pension funds that operated in Nigeria between 2018 and 2022 were obtained from the National Pension Commission (PenCom). Risk-adjusted return was appraised using the Treynor ratio, Sharpe ratio and Jensen alpha, while the Treynor–Mazuy and Henriksson–Merton multiple regression models were applied to decompose selective and timing skills. Performance persistence was assessed using the contingency table and rank correlation models.
Findings
Evidence shows that pension funds deliver excess risk-adjusted returns and exhibit selective skills. However, the evidence does not support the presence of timing skills, and there is overwhelming evidence that good (bad) performance does not repeat.
Practical implications
An evaluation of the investment performance of pension funds is crucial for ensuring the financial stability of retirees, maintaining economic stability and making informed investment decisions. It serves the interests of pensioners, pension fund managers, regulators and the broader economy. Our evidence that pension funds generate positive excess returns is a departure from most of the literature on managed funds. We recommend that more Nigerians should leverage the pension fund industry to grow their wealth and prepare for retirement.
Originality/value
This study, to our knowledge, is the first to appraise all the key facets of the investment performance of pension funds in the Nigerian context.
Keywords
Citation
Ajadi, A.D. (2024), "An empirical evaluation of the performance of Nigerian pension fund managers", African Journal of Economic and Management Studies, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/AJEMS-06-2023-0214
Publisher
:Emerald Publishing Limited
Copyright © 2024, Emerald Publishing Limited