The National Pension Commission just opened the transfer window for
RSA holders to freely transfer from their current PFA to another one.
According to PenCom and the code that governs pension accounts in
Nigeria, transfer between PFAs is an event that happens once a year, and
as such should be
taken seriously, after all, the success of a fund has
been known to be positively related to the fund manager’s skills.
Why Fire Your Fund Manager: Before you make that
transfer, have you asked yourself, why would I fire my current fund
manager? One of the reasons, if not the major reason why investors fire
their fund manager is because of poor performance. A fund manager that
makes negative or near zero returns while his peers or the broad market
index makes returns in double-digit will no doubt be on the chopping
board during transfer times. However, before you fire that seemingly
non-performing fund manager, find out how the market as a whole is doing
or did. If the market is doing or did badly, then the issue with your
fund manager probably derives from systemic risks that even the best
fund managers may not be able to diversify away.
Before Your Transfer: It may be necessary to do
your homework before you decide to transfer. Look at the portfolio
information of the fund you want to transfer into, what assets is the
fund manager investing in and what weights does he give to each asset
type, compare that with what your current fund manager is investing in.
Because of paucity of investible asset types in Nigeria and adherence to
regulatory requirements, most pension fund managers in Nigeria invest
in similar assets although with different weights. So pay attention to
the difference in weights.
How about Performance: Take a look at the historical
performance of the fund you want to transfer into. While past
performance does not guarantee future performance, it could give you an
indication of the difference between your current fund manager and the
prospective one. Ask the fund manager for their performance numbers over
the last 5 years and look for out-performance consistency.
How much are you paying for the Services: Take a
look at the fees being charged by the fund manager you want to transfer
to in comparison with the one you currently have. As required by
regulation, Nigerian pension fund managers are required to charge a
given percentage of fees, do your research and make sure that the fee
requirement is being adhered to by your prospective fund manager.
Customer Services is of importance: Another thing to
think through is the responsiveness of a fund manager to RSA holders.
How quickly, truthfully, courteously and professionally does your
current fund manager and your prospective fund manager respond to
enquiries and questions from RSA holders?
Availability of information/data: Think about
availability of information and data. In these days, data and
information is money, especially when such is provided in a timely
manner. Many pension fund managers have the prices of their pension
funds readily available on their website but there are still many of
them that you would go through the eye of a needle to get the
information. There are 2 pension fund managers that I have sent over 10
emails with request for pension fund prices, and they have adamantly
refused to respond and the information is not even on their website. For
such fund managers, it becomes difficult to know their performance, at
least independently and quickly. There is a fund manager that has the
information in a format that is not amenable to analysis. If I were to
make a change, I will dump those at a blink of the eye.
Experience Matters: Take a look at who the fund
manager employees. These days, some fund managers in Nigeria are
beginning to publish the names and qualifications/experiences of their
fund managers on the fund factsheets, if you can find that information,
it will be useful to know that your fund manager is a Chartered
Financial Analyst, CFA or the like. Do not be shy, call the fund manager
you want to transfer to and they will be happy to give the information,
if they know you want to transfer to them, especially if you have large
balance in your RSA account.
Fund Managers’ motivation: I know that it may not be
that easy to glean information from fund managers, but if you can, find
out if the guy overseeing your fund is being paid an incentive fee if
he outperforms the index or if he generates a certain return. A fund
manager that gets incentivized for his performance tends to be more
motivated than one that just gets paid his normal salary irrespective of
his investment performance. Therefore, go with those that get
performance-based incentive fees.
While the above are only but a few things to ruminate about while you
decide on if and where to transfer your RSA account, it is hoped that
it will help make the transfer decision a bit easy.
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