Strategic Asset Allocation

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International Social Security Association
ISSA REGIONAL CONFERENCE FOR ASIA AND THE PACIFIC
New Delhi, India, 21-23 November 2006
Management and Performance Challenges Encountered
in the Investment of Social Security Funds The
Experience of the Social Security and National
Insurance Trust of Ghana
Kwasi Boatin / Ernest Nyarko
Social Security and National Insurance Trust
Ghana
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(No Transcript)
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BACKGROUND

• Ghanas statutory Pension Scheme was established
  in 1991 under PNDCL 247 with SSNIT as the Trustee
• The Scheme covers
• Old age
• Invalidity
• Death and survivors lump sum payments
• Health Benefits
• The pensionable age is 60 and the benefit levels
  under the Scheme include
• 50 of average of the best three years salary for
  a contribution period of 240 months
• Pensions are capped at 80 of insured earnings,
  with current minimum monthly pension at 125,000
  (approx. US14)

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THE SCHEMES INVESTMENT GUIDELINES

• The current investment guidelines of the Scheme
  were developed and adopted in 2003.
• The guidelines were developed in response to the
  conditions that prevailed when the current Board
  of Trustees assumed office in 2001
• The Schemes investments were skewed towards
  fixed income instruments, when market conditions
  suggested more profitable investments

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SSNIT Asset Allocation Structure (1996 2005)
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Performance of SSNIT Portfolio vs. Selected Money
and Capital Market Instruments
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INVESTMENT GUIDELINES AND ASSET ALLOCATION POLICY

• Investment objectives
• Investment programme and structure
• Investment management
• Role and duty of investment Subcommittee
• Role of portfolio managers
• Reporting
• Proxy voting and trading policy
• Performance measurement

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Asset Allocation and Performance Measurement

• Asset Class Allocation Performance Benchmark
• Equities
• Active Public Equity 25 150-200 bps over
  the GSE Index
• Unlisted portfolio 4 20-25 Return on
  Equity
• Fixed Income
• GOG Bonds 1 5 Real Return (Inflation
  linke
• Third Party Lending 4 Bank of Ghana
  Prime100 bps
• Corporate Debt 2 Average Comm. Bank Base
  Rate - 150 bps
• Students Loans 12 1 year Treasury bill
  rate
• Money Market 32 91-Day
  Treasury Bill rate
• Real Estate 15 1 year T-Bill 200 basis
  points
• SPI/ETIs 5 Cost Recovery (minimum)

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INVESTMENT MANAGEMENT CHALLENGES

• Internal Challenges
• Investment monitoring capacity
• Asset allocation target vs. actual
• Industry and Regulatory Challenges
• Small country markets
• Corporate governance and trust building
• Legal and regulatory environment
• The pension law vs. foreign investments
• Limited exit opportunities
• Currency risks
• Inadequate infrastructural base
• Other Challenges
• Public perception
• Political factor

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PERFORMANCE REVIEWImproved Financial Health

• Improved financial health

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PERFORMANCE REVIEWAsset allocation Target vs.
Actual
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PERFORMANCE REVIEWImproved returns
Nominal Return Average Inflation Real Return
1997-2001 25.4 23.3 1.7
1998-2002 24.9 20.7 3.5
1999-2003 28.4 22.2 5.1
2000-2004 32.2 22.2 8.2
2001-2005 26.1 20.2 4.9
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PERFORMANCE REVIEWSSNITs Portfolio vs. the GSE
Benchmark