The Chief Executive Officer of Axis Pensions, Afriyie Oware, has challenged pension fund managers to stop funding the government and channel their resources into private sector to help unlock their potential for sustained growth.
Mr Oware said the practice where the fund managers acted like an extension of the Ghana Revenue Authority (GRA) by mobilising capital for the government at the expense of the private sector was inimical to national development and must stop.
He said the recent default of government payment on interests on government dated securities and the resultant domestic debt exchange programme (DDEP) should be an eye opener that government securities were neither a risk-free nor a prudent lender, hence the need to change the status quo.
Mr Oware said it was unfortunate that almost 90 per cent of pension funds in Ghana were invested in government bonds compared to the developed countries where less than 40 per cent of those resources were invested in treasury securities.
“We are probably the reason corruption is so high in the public sector because money is in abundance.
To build back better, we need to reverse the flow of capital from the government who I consider to be a parasite to the private sector.
“The key resource needed to activate the economic miracle we all aspire to see is our capital (pension funds), which we have been giving to government.
“The private sector is the engine of growth of every economy but unfortunately as the government says it with their mouth, they are with the other hand sucking out all the resources and crowding out the private sector,” the Axis Pensions CEO explained.
Mr Oware gave the advice at the fifth edition of the Axis Pension Strategy Conference in Accra.
An initiative by the lead pension fund manager, the conference is an annual event aimed at bringing experts in the industry together to deliberate on ways to better the pension sector.
It is highly patronised by industry stakeholders and supported by the regulator, the National Pensions Regulatory Authority (NPRA).
It is in partnership with CFA Society Ghana, Injaro Investments, IC Asset Managers, Sentinel Asset Managers, Oasis Capital Limited, Stanbic Investment Management Services and Blackstar Advisors.
Following the conclusion of the DDEP, Mr Oware said the country, particularly pension funds, needed to rethink the way they allocated capital as asset holders.
“An economy is as strong as its corporations.
We need to critically examine the role of pension funds in efficiently allocating capital in an economy.
“Like most financial institutions, our role, as pension funds, is to collect or mobilise capital from the surplus unit and then allocate the capital for investment in the deficit units for productive investments that can generate real returns,” he stated.
He thus urged the fund managers to move away from what he described as an ‘illusion’ that government securities were risk free.
He said there was nothing like risk-free in finance, adding that the DDEP must be a wake-up call that financial institutions could not continue to pile up their investments in government securities with the assumption that it was risk free.
“Pension fund managers and other investors have been under the illusion that government debt is risk-free and, therefore, continue to pile up money in government bonds.
He said the recent collapse of the SVB Bank in the US due to mark-to-market losses from risk-free securities further underscored the fact that government securities even from the most creditworthy governments were subject to market price volatility.
“So let us be clear; there is no free lunch in finance and there is nothing like risk-free, it is an illusion,” he said.
In his keynote address, the Chief Investment Officer of Black Stars Investment- UK, Kojo Amoo-Gottfried, emphasised the need for pension funds to diversify their portfolios and look beyond traditional investments such as government securities.
Mr Amoo-Gottfried delved into the effects of the domestic debt exchange on pension funds, strategies for managing risks in the current economic landscape and approaches for optimising returns while ensuring long-term sustainability.
He further stressed that diversification alone was not enough and encouraged pension asset owners to focus on the quality of their investments.
“This means selecting assets that have a proven track record of strong returns, as well as those that align with our values and ethics,” he stated.