Stabilisation, Heritage Funds’ investment options need review – Alex Mould …says funds must be invested in high-yielding portfolios


There is need to review the Stabilisation and Heritage Funds, to among other things allow these funds to be invested in high-yielding portfolios, Alex Mould – a former Chief Executive Officer of the state-owned Ghana National Petroleum Corporation (GNPC), has advocated.

“We need to review our Stabilisation and Heritage Funds. What are their objectives? Should more money be allocated to them? This is the perfect time to take a second look at restrictions on what instruments these funds can invest in, as we need to improve on our investment strategies. To do that means we need qualified fund managers and investment officers,” he told the B&FT.

Citing the Norwegian Sovereign Fund – which is one of the world’s richest sovereign funds – as an example, he said part of it is invested in profitable local oil companies and the funds are actively traded; and investment portfolios constantly change to options that offer higher returns on investment.

“Yet in our case, due to restrictions on the type of investments the Ghana Sovereign Funds are permitted to have, we have been averaging an investment return of between 0.5-1.25 percent per annum – which is unacceptable.

“For instance, we are only allowed to invest in Organisation for Economic Cooperation and Development (OECD) government financial instruments, and cannot even buy our own Ghana Government Eurobonds which gave a yield (rate of return) of 8.5 percent when originally issued in January.

“Our Eurobonds are trading at their lowest since issuance, at 70 percent of the original price – which gives a yield (rate of return) of 12+ percent – so this is a good time to invest in them, especially for the Heritage Fund as the maturities of these Eurobonds are 30+ years,” he added, asking why the funds are not being used to buy the country’s Eurobonds.

Another opportunity, he stated, could also have been to take advantage of the 88 percent drop in Tullow’s price, which is the closest traded proxy to owning part of the oil fields in Ghana. To him, an investment of a portion of the Heritage Fund in Tullow (and/or Kosmos) shares when the price fell to 10p would have yielded a 200 percent return on investment as the share price is now above 30p, and far below the highs of £2.50 seen a year ago.

Mr. Mould called for a policy to be instituted for a price insurance-hedge using financial derivatives – on a certain percentage of the country’s oil using the benchmark floor-price – as determined by the Petroleum Revenue Management Act (PRMA).

Heritage Fund must only be used as bridge financing facility 

Mr. Mould also noted that Finance Minister Ken Ofori-Atta’s proposed utilisation of the Heritage Fund should be resisted, saying that the Fund should be the last option. To him, government must look elsewhere irrespective of the cost of raising money. He however added that the fund should only be used as a bridge financing facility or a temporary line of credit to government.

“Presently, with the situation of the COVID-19 pandemic, if all options to raise money are exhausted and government is in a total bind to save human lives in the midst of this crisis, then in my view the Heritage Fund should only be used as a bridge financing facility or a temporary line of credit to government. This means that government must commit to and replenish these funds within a clearly predefined repayment timeline with a dedicated source of funding – our future generations are counting on us for this.

“Nonetheless, terms constituting such dire emergency situations to leverage the Heritage Fund need to be defined and agreed to – with a strong burden on government to prove beyond any doubt that they have exhausted all avenues to reducing costs and raising funds; only then should there be a national referendum to decide if these funds can be touched,” he further admonished.

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