Externally Managed Investments
As the investment institution managing the nation’s sovereign wealth fund, NSIA is tasked with delivering risk-adjusted returns against defined benchmarks across its mandate Funds. For both the Future Generations Fund (FGF) and Stabilisation Fund (SF) NSIA invests through fund managers. Manager selection is therefore a key component of our investment approach.
Both the FGF and SF are managed by carefully selected External Fund managers. All External Fund managers must meet certain requirements and must be approved by Authority’s Investment Committee before being onboarding for investment purposes. Additionally, External Fund managers must agree to abide by NSIA’s externally managed fund guidelines as prescribed in our Investment Guidelines.
Managers and Future Generations Funds
FGF’s initial Investment Policy Statements, Investment Guidelines and Strategic Asset Allocation were approved by the Board in July 2013. The most recent versions of the documents were approved in Feb of 2022.
Presently 30% of contributions to the NSIA is allocated to this fund. Given the investment objectives of the FGF, the Authority has set an investment horizon of about 20 years. Our near-term view of the market remains positive, and our asset allocation reflects this positive view. As such, 85% of the asset allocation is in growth assets, 5% in inflation hedge assets and 10% in deflation hedge assets.
Within the growth asset category, Management allocated 30% to equities of which two-thirds is invested in Developed markets and one-third in Emerging Markets. We presently allocate 20% of the FGF to absolute return funds which is driven by a diversified Fund of Funds products and stand alone strategies such as global macro, credit and long/short equity. About 25% of the FGF funds is allocated to private equity funds which is split roughly between growth, buyouts, fund of Funds, Venture Capital and Secondaries. The balance in the funds of 25% is allocated hard assets (5%) and other diversifiers (10%) while NSIA retains 10% in cash as deflation protection for the portfolio.
Our vision is to ensure that NSIA remains a best-in-class Sovereign Wealth Fund, playing a leading role in driving sustained economic development for the benefit of all Nigerians. The Authority continues to search for managers to fill our needs as we allocate capital to private
equity, hard assets, commodities, equity, and fixed income asset classes.
External Managers and Stabilisation Fund
The fund allocation to the SF is 20% of all contributions to the NSIA. The Investment Policy Statements, Investment Guidelines and Strategic Asset Allocation for the SF were initially approved in 2013 and updated in 2022. NSIA has been actively investing through External Fund Managers since October 2013.
NSIA has discretion to select intermediaries and independent managers to evaluate investment decisions on its behalf and to invest NSIA’s funds under documented arrangements provided that no more than 50% of the Fund’s assets shall be committed to any one intermediary or investment manager.
Given that liquidity and capital preservation are the main objectives of the SF, the Authority allocates funds with a mix of 75% in growth assets and 25% hedge assets under the SF.
Within the growth assets category, we invest in investment grade corporate bonds with maturities of 1-3 years with a buy and hold strategy. We have initially split this mandate across three managers. Our hedge asset class at the moment consists of US treasuries with maturities of 1-3 years.