The Chief Executive Officer (CEO) of Oasis Capital, Matthew Boadu Adjei has said that Private Equity (PE) represents a safe and prudent avenue for institutional investors, especially pension funds, to diversify their investment baskets, even as they seek long-term capital appreciation.
With recent reforms leading to a rise in private pension funds, that are rapidly accumulating assets under management, there have been calls for pension funds to reconsider their investment strategy, which have hitherto been concentrated in government-backed instruments, as the funds seek to minimise risk.
It is against this backdrop that Mr. Adjei suggests that alternate investment asset classes, specifically, PE – which typically invest in undervalued assets with high growth potential and are not listed publicly – would be ideal for pension funds, as they have access to patient capital.
Offering these thoughts at the 2021 edition of the Pension Strategy Conference organised by Axis Pension Trust in collaboration with the Chartered Financial Analyst (CFA) Society, Ghana, the Oasis CEO pointed to technology, housing and manufacturing as PE areas which offer the right balance of growth potential at minimal risk levels.
“In terms of sectors to invest in, I recommend a sector that is driven by innovation such as FinTech and technology because it is a sector that is moving the scheme of economic development in many jurisdictions… secondly, in a country like Ghana where infrastructure has to be built, I will recommend essential services, such, investing in the housing sub-sector and especially in mortgage instruments.
For instance, many governments have attempted to solve our housing problem in this country unsuccessfully and it is something we are all thinking through to see how to solve it and I think if capital is made available at a reasonable price to fund mortgages, that would be monumental,” he said.
He also cited manufacturing as a key sector, as he argued that it would help reverse the trend of net export deficits and its ensuing effect on the strength of the Cedi, relative to its peers. He however added that operators of local PE funds must exercise steadfastness, particularly at the governance level of the firms they acquire as there are challenges, some cultural, which must be surmounted.
“Every private equity practice that is worth its salt must get a bit more into the business, especially at governance level… from our own experience, one of the biggest risk is that entrepreneurs are the highest cause of business failure as such structures must be put in place to keep them disciplined and focused. This is largely because of factors such as asymmetric information and opacity of private sector,” he added.
The 2020 edition of the Pension Strategy Conference had as its theme ‘Adding value to pension funds through alternative investments’. The two-day event, which was held virtually, had a cross-section of industry experts as resource persons, including CEO of Broll Ghana, Tony Sekyere; Senior Economist with Databank, Courage K. Martey; CEO and Co-founder of Injaro Investments Limted, Jerry Parkes; Consultant, Kweku Adoboli and CIO at Axis Pensions Trust, Nana W. Boamah.