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Collapse of Investment Managers, Pension Funds are safe – Consultant

13/11/2019
Reading Time: 4 mins read
collapse of investment managers; pension funds are safe, ghanatalksbusiness.com
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Pension funds should largely be safe following the collapse of some 53 Investment Managers some of whom may be managing pension funds as Pension Fund Managers (PFMs).  Pensions Consultant, Mr. Yaw Korankye Antwi, made this observation when speaking to business platform Ghana Talks Business.  ‘There is no need for any kind of worry or panic for contributors’, he said.  

It is true that fund managers play a huge role in managing pension funds. However, they do not hold the assets.  They play an advisory role for the pensions trustees to make investment decisions, though trustees would largely go by fund managers’ recommendations.  There are a number of reasons not for contributors to panic.

Regulatory Guidelines for Investing Pension Funds

pension funds are safe, investment management collapse, ghanatalksbusiness.com
Mr. Hayford Atta Krufi, NPRA Boss

He further explained that, the rules for investing pension funds are quite strict and pension trustees are largely sticking to them. 

One rule is that PFMs cannot invest in any instrument created by themselves.  Therefore, shut down of a PFM does not necessarily mean investment funds are lost.  What could however hold funds is if a PFM recommended an investment into a mutual fund set up by another investment management company. Some pension funds might have been invested in mutual funds belonging to a closed down fund manager.  However, these should be in limited amounts as the investment guidelines for investing pension funds places a limit of 5 percent of the fund on one fund manager’s mutual fund.   

Yaw further stated, ‘it should also be noted that the writings have been on the wall for FMs who have been struggling for sometime and so most pension trustees must have reduced their exposure to some of these mutual funds.  Every good trustee should have done that’

SEC’s actions

Commenting on SEC’s actions, he stated that SEC has so far dealt with the issue well.    ‘What is left now, is how the claims of investors of the collapsed investment managers would be handled.  There are news of investors receiving capped amounts as a cushion and all that, but let’s see how this goes’.

The Banking Collapse on Pension Funds

A similar situation arose when some banks failed.  Pension funds which had been invested in collapsed banks’ fixed deposits were not lost.  Though the take-over banks re-arranged the terms which meant pension funds would either be held for longer or received less returns than originally expected.  But the loss of the amount invested was salvaged. 

The Future

He added that ‘Ghana at some point had go through this clean-up. When and how, we were not sure.  People have lost money, properties and even lost their lives in the process, but looking at how things were going, we would have woken up one day and the financial sector had crushed the whole economy’. There must have been some excesses. The price some financial sector entrepreneurs have paid is so dear, and this should better yield something better for the country. 

He expects the regulators to do better than they have done in the past because a major cause of this mess is as a result of regulatory lapses.  All financial services regulators should crack the whip when necessary. Else we will wake up in the next 5-10 years and we are going through the same cycle again’, he commented.

Business Owners

Retirement and Investment Planning Ghana
Yaw Korankye Antwi,

Mr. Korankye Antwi urged business owners to also do well to protect their own turf through best governance practices rather than by aggressive business strategies.  ‘In all these collapses, we have heard business owners and their associates mentioned and vilified but not the staff members of the regulators who supervised and might have even benefited from the rot.  Adhering to best practices can be tough in an environment like ours but really, that’s the way to go, for a sound financial industry in the future’.

Robust System – Collapse of Investment Managers

Yaw thinks the private pension system has shown some robustness to industry shocks so far. The pensions industry has withstood the shocks of the collapse of the microfinance, savings and loans, finance houses and the traditional banking sectors.  This is in contrast to what happened in other jurisdictions where financial sector collapses culminated in a wide wipe-out of pension funds. This, he attributed to the laws and regulations governing Ghana’s Pension’s sector and the willingness of industry players to adhere to them.  The regulator has shown increasing capacity and readiness to deal with issues.

Ghana Talks Business: ghanatalksbusiness.com

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