An empirical evaluation of the performance of Nigerian pension fund managers

Adedeji David Ajadi

African Journal of Economic and Management Studies, 2024, vol. 15, issue 4, 620-635

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: Pension funds; Risk-adjusted returns; Selectivity; Timing ability; Performance persistence; National pension commission; Portfolio management; G11; G12; G14; G23 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-06-2023-0214

DOI: 10.1108/AJEMS-06-2023-0214

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