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Business News of Tuesday, 20 February 2018

Source: thebftonline.com

Private pension funds hit GH¢9.7bn; expert wants funds used for prudent investments

Private pension funds have maintained their strong growth over the years, reaching a record high of GH¢9.7billion in 2017, from the previous year’s GH¢6.8billion.

Data from the sector regulator, the National Pensions Regulatory Authority (NPRA), show that 9.2 billion of the 9.7 billion was accrued from Assets Under Management (AUM) managed by licenced trustees, while some GH¢0.5billion came from the Temporary Pension Fund Account (TPFA).

Last year’s figure, which is over 4.5 percent of the country’s Gross Domestic Product (GDP), represents a GH¢8.4billion increase in private pension funds between 2013 and 2017.

However, given the steady growth of private pension funds over the last five years, there have been mixed debates on what sort of investments the funds should be used for.

For instance, most financial experts hold the view that the money should be used to fund long-term developmental projects in the country.

Dr. Sam Ankrah, President of Africa Investment Group and an investment banker, told the B&FT that a diversified portfolio is imperative.

“Investing in capital markets will aid in creating more liquidity, which in essence funds the government and its activities for the betterment of Ghanaians. On the other hand, we need to accelerate long-term investments. The ideal way to utilise the funds is to invest in both long-term projects and capital markets.

“The long-term projects should also ensure the funds are allocated in a principled, equitable and efficient way, eliminating any profligacy, corruption and other pilferages. That has been the biggest problem with investing in long-term projects where there is malfeasance,” said Dr. Ankrah.

“All the above are asset classes to invest in, and since pensions have long-term liabilities investments in cash flow-generating businesses (private equity), trade finance funds are a great instrument to provide higher yields along with exposure in dividend-yielding stocks.

“Effectively, the investments team has to look at every sector, geography and asset class, conduct an adroit due diligence and have a strategy to place assets. Equally important is a streamlined management structure that is able to be versatile as markets and sentiments change quickly,” he added.

Doing so, Dr. Ankrah believes, will not only offer contributors higher returns on their contributions, but also support the country’s short and long-term development goals.

Any investment in the country’s securities, private equity or private debt, he added, has both an explicit and implicit impact on the economy.