Moderating Effect of Risk Management on Pension Fund Investment Strategies and Financial Performance of Pension Fund Administrators (PFAs) in Nigeria

Abstract

Risk management plays a moderating role by ensuring that the inherent risks associated with asset classes such as equities, real estate, and offshore investments are properly identified, quantified, monitored, and controlled. In the Nigerian context, the limited uptake of risk-based asset allocation frameworks hinders the ability of PFAs to exploit high-yield investment opportunities. The study examined whether risk management has moderating effect in the relationship between pension fund investment strategies and performance of pension fund administration (PFAs) in Nigeria. An ex-post-facto research design was employed for this investigation encompassing the ten-year period from 2014 to 2023. This duration was selected to evaluate the effect of risk management and the financial performance of Pension Fund Administrators (PFAs) in Nigeria. The population consist of all the 21 registered pension fund administrators (PFAs) in Nigeria using 10-years study time frame from (2014-2023). While filtering criteria were used and 14 out of 21 meet the criteria: The study finds that risk management has a positive but statistically insignificant effect on the return on equity (ROE) of Pension Fund Administrators (PFAs) in Nigeria. This suggests that while improved risk management practices are directionally associated with better equity returns, this relationship is not strong enough to be statistically validated within the dataset and timeframe used in the analysis. In conclusion, the study finds that moderating role of risk management requires refinement, especially in relation to real estate investments, where it was found to negatively influence the financial outcomes. The study acknowledges its limitations and suggests that future research should explore more nuanced aspects of risk management practices and their broader implications for pension fund performance.