NSIA To Reallocate US Investment To Aviation, Others To Avoid Shocks

Apart from investment in healthcare and roads, the Nigerian Sovereign Investment Authority said its investment plans particularly in 2021, will be done cautiously to reduce exposures to the spike in United States Treasury yields and technology shocks.

The Managing Director of the wealth fund, Uche Orji, said this in a recently monitored interview on Bloomberg.

The NSIA boss stated its investment based on the construct of the Future Generations Fund which between that and the Stabilisation Fund holds 60 per cent of NSIA assets.

Orji expressed concerns over rising U.S yields and expensive valuation of big U.S. firms.

US Treasury yields  are benchmarked with borrowing costs in many financial markets.

Rising yields reflects falling demand for bonds, and recently has forced investors to reprice the value of high-growth shares to reflect changes in interest-rate expectations.

On Thursday, 10-year U.S Treasury yield climbed above 1.7 per cent, representing 14- month high.

The U.S. treasury makes  up to 25 per cent of the NSIA portfolio, but Orji disclosed that the NSIA has adjusted its 40 per cent bond exposure in the United States treasury market.

“We adjusted that. That was an old allocation structure,” said Orji, adding that for the US treasury, the exposure is currently 20 per cent or below that.

He further expressed concerns on rising interest rates, saying “Am very worried about rising interest rates.”

But Orji said on rising interest rates in the U.S. markets, the NSIA is “watching it closely.”

He said the NSIA was very bullish across different asset classes last year, adding that “we are a little bit more cautious now because of rising interest rates.”

The rally in equities markets in 2020 was responsible for the rising rates in the U.S., according to Orji.

“We are adjusting ourselves as a consequence,” he added.

Orji disclosed in 2021, the NSIA will pay attention to assets allocations to reduce exposure in the market.

He said, “In the middle of the downturn last year, we went aggressively bullish, particularly equities. But this year, we are just continually tinkering with assets allocations to reduce that exposure, especially exposure in tech.”

But Orji said, the reallocation would be within equities with focus on broader markets like aviation, consumer cyclicals sector stocks.

“Where we want to take the most exposure will be on consumer discretionary and in cyclicals, industrial cyclicals, we are taking the most exposure in those places,” Orji added.