Ghanaian pensions struggle to enter PE

Ghanaian pension funds are struggling to enter the private equity market more than six months after securing permission to invest in alternatives.

Speaking at the Emerging Market Private Equity Association’s Private Equity in Africa conference on 18 October, Kofi Fynn, managing director of Accra-based trustee services provider Petra Trust Company, voiced concerns over the level of understanding regarding private equity investment in the country.

“I think the general problem you find in the pension space, at least in west Africa… is just a lack of capacity and expertise to do this kind of work,” Fynn told delegates. “If you look at the general pensions here I don’t think any of us knows how to do it.”

Fynn said Ghanaian pensions may have to consider funds of funds over direct or standard fund investments in order to take advantage of the additional intermediation.

“I think the general problem you find in the pension space, at least in west Africa… is just a lack of capacity and expertise to do this kind of work. If you look at the general pensions here I don’t think any of us knows how to do it”
Kofi Fynn

“I know it’s an extra level of obstruction but if you have 10 pension fund managers who don’t know how to do this and still want to make allocations, how do you get that decision-making in there?”

Ghana’s National Pension Regulatory Authority allowed pension funds to invest in private equity on 1 April. The decision was intended to increase the diversification of Ghanaian pension fund assets as well as providing a much-needed capital boost for the economy.

Pension fund managers are permitted to allocate 15 percent to alternative assets, with no more than 10 percent of total AUM in any one sub-asset class and up to 5 percent in external assets. Alternative investments must be approved by the NPRA and are subject to qualifying conditions outlined by the regulator, which favours vehicles targeted at the cocoa and infrastructure sectors.

Petra Trust, which is 25 percent owned by emerging markets specialist LeapFrog Investments, helps pension funds decide asset allocations, form investment strategies and select fund managers. Ghanaian trustees held 4.1 billion cedi ($933 million; €795 million) of assets under management at the end of 2016, according to NPRA figures.