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PENSION funds should start considering alternative investments in hedge funds, private equity and venture capital for better yields, a senior executive said last week. MMC Capital executive director Itai Chirume told Zimbabwe Association of Pension Funds delegates attending the association’s annual conference held in Johannesburg, South Africa last Friday that of late, yields from traditional investments have been subdued and time was “ripe” to invest pension assets in alternatives.
In advanced markets, alternative investments have proved to be attractive options for pension funds where allocations are now as high as 20 percent of fund assets.
“This market is now ripe for alternative investments,” said Mr Chirume.
“The background is we have been invested in traditionals and lately, like in the last two years, investments returns from the traditionals have been quite devastating.
“So the question is, are we not ripe for alternative investments.
We are talking of investments such as private equity buy outs, venture capital and hedge funds.
“Because of the opportunities that lie in the economy, where we have a huge infrastructure deficit, undercapitalised companies, low industrial capacity utilisation, I think it is ripe and pension funds should consider investments in that space.”
He said in the frontier and emerging markets, like Zimbabwe, there is serious scope of growth.
As such, local pension funds should drive growth in alternatives. There is danger that the space might end up taken by offshore capital,” he said.
Mr Chirume added the indigenisation policy presented a good opportunity for pension funds to participate in local assets.
In her presentation earlier, Insurance and Pension Commission chairperson Mrs Lyn Mukonoweshuro urged pension funds to explore alternative investments beyond property, equities and money markets.
Mr Chirume however noted that there was need for authorities to come up with regulations and “incentives that are permissive” to encourage alternative investments.
Online Reporter