Pension Fund investment in REITs falls to N20b

The Pension Fund Operators Association of Nigeria (PenOp) has revealed a significant decline in investments in Real Estate Investment Trusts (REITs) over the past five years, highlighting a shift towards direct real estate investments.

According to an analysis shared on its official Instagram page, PenOp reported that investments in REITs fell from N239.28 billion in 2020 to just N20.06 billion by the end of 2024. The lowest point was in 2022, when investments dropped to N14.14 billion, down from N153.52 billion in 2021. While there was a slight recovery in 2023 to N21.04 billion, the decline resumed in 2024.

PenOp attributed the gradual decline to the limited availability of REITs in the Nigerian market. However, the association noted that active pension funds have shifted focus to investing in real estate through private equity funds, while closed pension funds have continued to invest directly in real estate.

In 2024, direct real estate investments by pension funds reached N273.06 billion, a significant increase from N245.34 billion in 2023. Five years earlier, in 2019, direct investment stood at just N5.13 billion, underscoring the rapid growth in this segment.

Combined, pension fund investments in the real estate sector through REITs and direct investments totaled N293.12 billion in 2024, representing a 10.04 percent increase from the N266.38 billion recorded in 2023.

In the statement, PenOp emphasized the importance of real estate investments in pension fund portfolios, describing them as a hedge against long-term inflation and a source of long-term capital for developers.

While active pension funds are restricted from directly investing in real estate by regulations, they are permitted to invest in REITs. Closed pension fund administrators and those managing defined benefit schemes, however, are allowed to engage in direct real estate investments. As of Monday, three REITs were listed on the Nigerian Exchange (NGX).