Analysis of Investment Decision by Nigerian Pension Fund Administrators (PFAs)

Abstract

Decisions taken by Pension Fund Administrators whether to invest in a particular asset class or not depend upon relative importance of different factors. The relative importance of these factors and the interactions among decisions taken by PFAs has remained unknown to the contributors. Therefore, this study is designed to examine factors affecting investment decision in PFAs. This research work examined the factors that influence investment decisions in Nigerian PFAs. The study also evaluated investment decisions in Nigerian PFAs based on both qualitative and quantitative factors.
Primary data were used for this research, which were generated through the use of questionnaire. Simple random sampling technique was used to select respondents from five PFAs in Nigeria. Data collected were analysed using factor analysis.
The result of the study indicates that three factors were considered by PFA managers when making investment decisions: Economic, Risk and Security of real estate factors. The study concluded that National Pension Commission should be a bit flexible in its regulatory restriction of investment areas of PFAs to enhance a better investment decision making process. The study therefore, recommended that PFAs should use reward structure to ensure accountability of those that are in charge of investment decision making.

Key words: Investment; Decision making; Pension Fund Administrator; Factor analysis; National pension commission