THE INFLUENCE OF INVESTMENT RISKS ON SUSTAINABILITY OF OCCUPATIONAL PENSION FUND ASSET IN NIGERIA

Pension funds take on long-term securities and therefore support both primary and secondary capital markets. In developed economies with universal banking systems, these funds usually buy long-term bonds issued by banks; this allows banks to lend for longer periods to their corporate customers. This study investigates the effect of investment risks on pension fund assets in Nigeria using a descriptive research design. The data were collected through structured questionnaires and analyzed with correlation and multiple regression techniques. Investment risk was captured by four proxies: purchasing power risk (PPR), market risk (MAR), interest rate risk (IRR), and business risk (BUR) as independent variables against the dependent variable, pension fund assets (PFA). The results indicated that IRR and BUR have significant positive effects on PFA with coefficients of 0.416 and 0.691 respectively at p=0.000 for both. On the other hand, PPR and MAR were found to have an insignificant effect on PFA with coefficients of 0.133 and 0.044 at p-values of 0.086 and 0.414 respectively. The study therefore concludes that while purchasing power risk has a negative but insignificant relationship with pension fund asset sustainability, and market risk has a positive but insignificant relationship, both interest rate risk and business risk have positive and significant influences. Based on these findings, the study recommends that pension firms diversify their investment portfolios so as to be able to gain exposure to assets with different sensitivities to inflation such that when inflationary pressures come into play regarding the performance of investments, they will assist in balancing risk against return.