Key Highlights of the Revised Regulation on Investment of Pension Fund Assets

The National Pension Commission (PenCom) has revised the Regulation on Investment of Pension Fund Assets, the revision brings about the introduction of additional investment instruments which broadens the range of permissible instruments to enhance diversification and improve returns.

Below is a summary of the new permissible instruments introduced as published by PenCom.

Reverse Repos securities purchased with an agreement to resell in the future.
Gold Receipts tradable on SEC-recognised exchanges, allowing exposure to gold without physical storage.
Securities Lending – subject to full guarantee by central counterparty.
Private Issuance by Registered Corporate Entities direct participation in de-risked private placements by corporates.
Derivatives – restricted to risk management purposes only (e.g., Futures, Forwards, Options, Swaps).
Commodity-Backed Instruments linked to physical commodities such as oil, gold, and agricultural products.
Agriculture Investment Funds – including debt securities, equities and infrastructure projects within the agricultural value chain.

Adjustments of Investment Limits
To rebalance risk and foster long-term growth:

Federal Government Securities – plain vanilla FGN securities reduced across all funds, with an offset option for asset-backed instruments.
Infrastructure Funds allocation limits increased in line with the PenCom’s strategy to promote impact investing, hedge the funds against the increasing rate of inflation.
Single Entity Exposure Cap across the six funds within the Multi-Fund Structure, PFAs must not hold more than 25% of instruments issued by a single corporate entity.

Incorporation of Operational Frameworks
The Regulation now consolidates operational frameworks for:

Non-Interest Investments
Co-Investment of Pension Funds by PFAs
ESG integration – PFAS/CPFAs must integrate ESG factors into investment decisions, with emphasis on governance, responsible investing, inclusive growth and long-term allocation to priority sectors that drive sustainable national development or other areas designated by the Commission.

Expanded Definitions

Clearer and new definitions have been introduced, including those relating to Fund VI (Ethical Fund), with refinements to existing terms for better regulatory clarity.

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