The Chief Investment Officer for Axis Pension Trust Limited, Nana Wiafe Boamah, has debunked the notion that Corporates Trustees and Fund Management Companies do not have appetite for investing in Real Estate in Ghana adding that it is rather due to restriction provided in the National Pensions Regulatory Authority’s (NPRA) regulatory guidelines. He indicated that far from such assertions, Corporate Trustee and Fund Managers have a lot interests in investing in real estate but for the restrictions from the Pensions Regulatory body.

Many have been questioning why a larger portion of the Corporate Trustees and Fund Management Companies prefer debt investments like Government Bonds and the likes, to the detriments of Real Estate investment. Many aver that, Real Estate is a long-term investment and since the funds these institutions manage are also long-term funds, the maturity mismatch dilemma which deposit taking institutions face when they decide to invest in Real Estate would not arise in their case.

But speaking to Real Estate Times Africa, Mr. Boamah indicated that, the NPRA guidelines only permit these institutions to invest in Real Estate Investment Trust (REIT) and other Private Equity instruments traded in a well organised Stock Exchange. Meanwhile, it is a matter of public knowledge that, Ghana currently does not have legislation that allows for the trading of REITs on the Ghana Stock Exchange. Nana Wiafe therefore attributed the low investment of their Funds in the Real Estate sector to the current regulatory restriction and the fact that REITs are not trading in Ghana.

“…the guideline basically is to safeguard the money. Now yes, the guideline makes room for us to invest in alternative assets like Real Estate. However, the same guideline tells us the kind of Real Estate investment we can do and the caveat is a Real Estate Investment Trust. A Real Estate Investment Trust is a listed investment vehicle that trades on an organised Stock Exchange. The country we are in have no such Real Estate investment instrument in the market”, Nana Wiafe explained.

On the NPRA ‘Guidelines on Investment of Pension Scheme Funds’, 2.1. (b) and (c) under Limitations and Prohibitions of the guidelines state that, “Trustees and fund managers shall not violate the provisions in this section. They shall not: b) make any investment of pension funds that will result in the trustee, pension fund manager or scheme gaining management control of a company in which the investment has been made; c) acquire any securities which are unpaid or partly-paid for except for purposes of entering into a Private Equity arrangement within the meaning of these Guidelines.”

The Nana Wiafe added that, the Corporate Trustees and Fund Management Companies have been advocating for the relaxation of the restriction by the regulator for some time now. “So, it is really their doing not ours. So, what we have been pushing for the past few months is for the NPRA to be able to relax the vehicle through which we can invest in Real Estate”, Mr. Boamah stated. He also added that, the relaxation should allow them to investment directly in the core Real Estate. “so, what we are saying is that, they should allow us to invest directly in Real Estate opportunities. For instance, if I see the standard chartered Head Office building and I want to buy to it, I should be able to buy directly as a pension fund not via the vehicle”, he noted.

Mr. Boamah added that, this is really the challenge they are facing. He noted that, “We have made the advocacy, we made our point to the regulator, that they should relax some of restriction. So, we are yet to hear from NPRA how serious they are going to take that proposal.” He quickly added that, “the Public market is not risk free as they [regulator] think. …the fact that an investment is listed does not make it a risk free.”

“Even when it comes to buying shares of Companies, if the Company is not listed, we cannot buy. So, are we saying Companies like Fidelity and zenith Banks that are not listed are bad investment? …So, because of the restrictions, there are a lot of opportunities that we see that we are not able to take advantage of”, Mr. Boamah espoused.

On the Alternative Investment, the guideline further gives specific requirements which must be met. Guideline 7.2. adds that, “Pension funds may be invested in Real Estate Investment Trusts or Funds, subject to the following requirements: a) the Real Estate Investment Trusts or Funds complies with all relevant provisions under the Act, any Regulations and other directives as may be issued by the NPRA; b) the Real Estate Investment Trusts or Funds complies with all requirements prescribed by the Securities and Exchange Commission; c) the company managing the Real Estate Investment Trusts or Funds has a minimum of five years’ continuous experience managing the assets of third parties; d) the face value of the issue is not less than Ten Million Ghana Cedis (as adjusted from time to time by the NPRA); and e) any other requirements prescribed by the NPRA.”

The suggestion therefore is that, the reason why the Corporate Trustees and Fund Management Companies have less investment in Real Estate is because of the regulatory restriction from the NPRA guidelines.

Nana Wiafe Boamah works on Strategic Asset Allocation for Axis Pension Trust Ltd.’s assets as well as working with external managers to implement investment policies. Prior to AXIS, Nana spent 3 years as the Head of Corporate Finance at Algebra Securities Limited a boutique investment banking firm specializing in sell side capital raising. He is also a former Senior Market Risk Analyst at Standard Chartered Bank with key responsibilities of interest rate and liquidity risk management across the Bank’s banking book.

Source: Mohammed Bomanso Issah (Real Estate Times Africa)