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Investing pension funds outside Ghana may grow industry

Deputy Managing Director of Petra Trust Company Limited has said exploring the idea of investing pension funds outside of Ghana may provide opportunities for growth of the pension fund industry.

Chris Hammond, stated that exploring the markets of our neighbours on the African continent which have more robust markets will be a good place to start.

He said, “Maybe Nigeria, Kenya, South Africa, Egypt and other countries are closer to us but have better-developed equity markets.”

Mr Hammond, “Generally speaking there is advantage to allowing pension funds to go out of the country today.”

He added that, this, if considered must be done with significant controls and appropriate mechanisms to mitigate the propensity to take risk

Investment Guidelines

He also stated that the nature of the investment guidelines though not providing significant investment room was the right one for the Ghanaian pensions industry.

Mr Hammond, “My opinion is that the guidelines are a bit conservative but appropriate for where we are as an industry today.”

He described the evolution of the guidelines as one that had given them space to invest in other areas such as private equity and also increase the quantum of investments in asset classes such as listed or equities.

He however added that due to the way the Ghanaian financial market is, pensions funds as significantly constrained in how much they can even invest in the various asset classes. Supply of the various investment instruments may not always provide enough for demand by pension funds.

Mr Hammond, “For instance most schemes t although they allowed to go up to 20% in equities will probably have 5% or sometimes less…”

He said, “That is because the number of equities you can buy and the liquidity once you buy the equities and want to sell is very limited and therefore you are forced by the market itself to act below the risk levels that the guidelines allow you to take”

The Investment Guidelines for Pension Funds are set out by the regulator of the National Pensions Regulatory Authority (NPRA).

The guidelines set out how much a pension trustee can invest pension funds or pension contributions to generate returns for the contributors.

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