Pension Board Index: Shaping the Future of Pension Fund Investments

Taiwo Ajayi
2 Min Read

In a groundbreaking collaboration, the Nigerian Exchange Limited (NGX) and the National Pension Commission (PenCom) have introduced the NGX Pension Broad Index (NGXPENBRD), aiming to reshape the equities investment landscape for pension funds.

Launched on June 15, 2023, this innovative index addresses the limitations of existing benchmarks, providing a more inclusive and representative measure of the investment universe for pension funds.

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Overcoming Traditions and Constraints:
Historically, pension funds relied on the NGX All Share Index (ASI) and NGX Pension Index (PI) to evaluate equity portfolio performance. However, both indices had limitations—the ASI included stocks ineligible for pension fund investments, while the PI offered a narrow representation dominated by high-value stocks. Recognizing these constraints, PenCom and NGX joined forces to create a more comprehensive benchmark.

Birth of the NGX Pension Broad Index:
The NGXPENBRD rectifies the shortcomings of the ASI and PI by expanding the universe of eligible stocks, incorporating stringent criteria aligned with the Regulation on Investment of Pension Fund Assets. To be included, companies must demonstrate consistent taxable profits, distribute dividends or issue bonuses, and adhere to NGX’s free float rules.

Promising Performance and Regulatory Approval:
Since its launch, the NGX Pension Broad Index has exhibited robust performance, aligning seamlessly with PenCom’s regulations. Officially endorsed by PenCom, the index is now recognized as the benchmark for Nigeria’s pension industry equity investment portfolios, solidifying its credibility.

Guiding Investments and Ensuring Stability:
The NGX Pension Broad Index is poised to play a pivotal role in guiding investment decisions for PFAs, offering a comprehensive view of the market. Its well-diversified composition and adherence to regulatory criteria contribute to enhancing the overall stability of Nigeria’s pension industry.

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