PFAs Raise Stake in Real Estate by N267bn in Five Years
-
Loading... - Amina Bello
- 16 Jan 2025
- 44 Views
- 0 Like
- 0 Comment
Nigerian Pension Fund Administrators (PFAs) have significantly increased their investment in real estate over the past five years, with a remarkable growth of N267.93 billion, representing an increase of 52,004.85 percent. This surge in investment reflects a rise from N5.13 billion in 2020 to N273.06 billion by the end of 2024, according to data compiled by the Pension Fund Operators Association of Nigeria (PenOp).
Despite the impressive growth in real estate investments, the data also reveals a concerning trend in investments in Real Estate Investment Trusts (REITs), which have seen a decline of over N219.22 billion during the same period. Investment in REITs dropped from N239.28 billion in 2020 to just N20.06 billion in 2024. Analysts attribute this decline to a shortage of available instruments in the capital market, which has led PFAs to explore alternative investment avenues, particularly private equity deals.
PenOp analysts explain that PFAs have traditionally invested in real estate through two primary methods: direct investment and investment via REITs. While regulations prevent active pension funds from directly investing in real estate, they can still participate in REITs, which are regulated investment vehicles that allow collective investment in real estate. In a REIT, investors pool their funds to invest in a trust that manages real estate assets.
The gradual decline in REIT investments has prompted active pension funds to pivot towards private equity funds for real estate investments. This shift is seen as a response to the limited availability of REIT products in the market. In contrast, Closed Pension Funds (CPFAs) have the flexibility to invest directly in real estate and have reportedly invested nearly N300 billion in direct real estate as of 2024.
The analysis from PenOp highlights the importance of real estate investments as a significant asset class within pension fund portfolios. These investments not only help hedge against long-term inflation but also provide developers with a reliable source of long-term capital.
The substantial increase in real estate investments by Nigerian PFAs underscores the growing recognition of real estate as a vital component of pension fund strategies. As the market evolves, the shift towards private equity investments and the challenges faced by REITs will continue to shape the landscape of real estate investment in Nigeria. With a focus on long-term growth and stability, PFAs are poised to play a crucial role in the development of the real estate sector in the coming years.
