The country missed a novel opportunity to invest portions of its pension funds in medium to long term instruments, the Managing Director of FirstBanC Financial Services, Mr Amenyo Setordzie, has observed, citing the inability of pension fund managers to participate in the US$2.25 bonds issued earlier this month.
By limiting the offer period of the issues to about three days, Mr Setordzie said the government, through the Ministry of Finance, had made it impossible for pension fund managers to consult with their board of directors, trustees and custodians before reaching a decision to invest in the instruments.
The result, he said was the inability of none of the 78 private companies managing tier two pension funds to take stakes in the seven-year, 10-year and 15-year bonds issued in April.
Beyond it being worrying to the industry, Mr Setordzie explained in an interview that the gesture meant that the country had pushed back plans to actualise what it has been longing for – get tier two pension managers to lock up some funds in medium to long term instruments.
“We are always encouraging our pension managers to go into long term because that is actually where our pensions should be. Currently, what they do is that most of them have heavy exposure to the short-term bills – 91-day and 182-day bill – and because of that they have to keep rolling over and that does not augur well for pension funds,” he told the paper on April 23.
“So, this was an opportunity for us to allow them (pension funds) to do the things that we have always been saying that they should do but unfortunately, we did not give them the chance,” he added.
Capital flight
Since 2010 when a new law that split the pension business into three tiers came into effect, millions of cedis have accumulated as contributions from employers and their employees under the tier two and three schemes, which are managed by the private sector.
Although some of these contributions are still locked up at a temporary pensions fund account (TPFA) at the Bank of Ghana (BoG), a chuck of it has been disbursed and is now being invested in line with the guidelines governing the investment of those funds.
The unavailability of long-term instruments in the country has, however, forced some of the managers to continually invest majority of the funds in short-term debt securities that are rolled over upon maturity.
This is not good for the growth of the pension business, Mr Setordzie said.
“I am sure if they had opened the offer up, some of these fund managers would have liked to bid but because it was so short, some of them had difficulty getting approvals from their boards and things like that,” he said.
“If they had been allowed, our pension funds would have been exposed and in the long run, it would have provided a cushion such that you will not have so much funds going out of the economy or capital flight,” he said.
Although the details of issues are out officially, it has emerged that USA-based investment firm, Franklin Templeton Investments (FTI), took about 95 per cent of the issues.
Going forward
In future offers, Mr Setordiz said the government should give pension fund managers “a window of opportunity” to consult with their stakeholders and participate in the buying of the bonds.
“Just give them time to do their in-house appraisals, consult their boards of trustees and if they have the approvals, they can come in and invest in our bonds,” he said.
This, he said could progress to a stage where the Ministry of Finance could do its book-running – asking for offers from penciled investors – based on the pension funds.
Meanwhile, the paper has learnt that some of the pension fund managers have taken advantage of the secondary bond market to take trade in the various bonds issued in the past.
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