Pension industry assured on offshore investments
Insurance and Pensions Commission (IPEC) has assured the pensions industry that it will get all the necessary support to ensure smooth cross boarder supervision in relation to offshore investments at a time the industry is now considering alternative investment markets.
At a time the industry has faced major economic headwinds which has left the sector battling confidence issues last year government said it was working on modalities that will allow pension funds to invest their monies offshore.
The industry had been lobbying the State for permission to invest local pensioners’ contributions out of the country, especially following the re-emergence of significant inflationary pressures during the 2018/2019 currency reforms.
IPEC Director Pension Supervision ,Cuthbert Munjoma on Tuesday told a Webinar on Pension Fund Investing – Navigating the Offshore Markets organised by Risk and Investment Management Consulting Actuaries (RIMCA) that the regulator was working on a customised exchange control framework collaboration in offshore investment monitoring .
Munjoma said IPEC had also partnered with RBZ and Seczim to put in place administrative framework for approval of applications with the first application for offshore investment having been approved.
Munjoma said offshore investments were important as they made way for diversifying sovereign risk across countries, currencies, markets and geographic.
“They also allow us to take advantage of global investment opportunities in high growth and tax efficient jurisdictions and structures. They allow assessment of the ability to access other markets, that is ,completeness of markets .Earning returns in foreign currencies provides additional flexibility Case of NRZ pension Fund –10 000 Pounds grew to over US$115 million in 40 years,” he said
However Munjoma said offshore investment were not the panacea to challenges facing the industry but trustees needed to rely on professional investment advice in investment decision-making and investment monitoring.
He added that Ipec was offshore investments also came with a considerable level of risk as reliance on foreign regulator for cross border monitoring of investments brought with it high risk of unregulated private equity.
“Multilateral institutions present less risk .There are valuation issues on private equity- risk of failed investments in unregulated markets. Trustees are encouraged to closely monitor performance and take corrective measures should the need be. Trustees need to consider
benefits and challenges of investing offshore IPEC will implement a risk-based approach to the implementation of the guideline Waivers may be granted in line with IPS of respective funds and fund demographics .Offshore investment is not the panacea to challenges facing the industry there is need to address key challenges facing the industry – governance, risk management, data integrity etc” he said