F
OECD / IOPS GLOBAL FORUM
ON PRIVATE PENSIONS
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
Long Term investors?
 Pension funds and insurers represent significant savings
 Drivers of development of Listed and unlisted capital
markets
 Especially in developing countries – biggest source of
capital for diversified, third party investments
 Pension Funds are Asset Allocators relative to liabilities
 Pension fund liabilities – Clearly long to very long term
for DB
F
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
Long Term investors?
 Mature DB fund has DMT of around
 7yrs for pensioner members (NRA 60),
 18yrs for active members (salary-weighted average age 40)
 Opportunity to invest for very long term, e.g. unlisted equity
held to maturity (IPO)
 What is risk for a long term investor?
 Volatility is noise
 Valuations are academic
 Liquidity is irrelevant
F
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
Long Term investors?
 Primary measure of risk not in sentiment (market




F
volatility), but real capital at risk
Patient capital unlocks growth potential and offers
opportunity for long term growth
In Developing countries, with young populations, and
immature pension funds (I.e. very young average age of
membership), opportunity to invest for very long term.
Opportunity for Treasuries to issue debt along full yield
curve, even very long term
30 years plus, as observed in SA (stable inflation or
inflation-indexation)
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
Or a series of short terms?
 Manage funding to triennial valuation reporting, solvency
illustrated for Regulators
Solvency reserves need funding, trustees need to learn to
accept fluctuations in funding level.
 Investment performance monitoring 1/4ly, yearly, 3 yearly.
 Drives churn in market in pursuit of dubious value
opportunities – about 60% of listed equities portfolio holding
churned per year
Use longer term performance periods (in surveys, for
performance fees calculations)
 Regulation limits “more risky” unlisted investments. Limits
gradually being relaxed
F
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
Or a series of short terms?
 “Previous trustees did a bad job”
 Lack of expertise on part of trustees, coupled with trustee
liability – aversion for complex long term investments –
default to listed investments with good information
Compulsory investment skill to exist within board
 Cash payouts on exit:
 Fund becomes short term savings account
 Valuation, liquidity, volatility become important
Legislate compulsory preservation
F
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
Driving market efficiency
 Gravitate towards listed investments
 Improve integrity of market
 Less government interference
 Demutualisation
 Regulation
 Increased demand for capital market services leads to
increase in capital investments in market services
 IT – speed of processing, reporting, settlement
 Increased regulation – increased knowledge in market
 Increased competition as providers seek market share
Improve efficiency
F
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
Driving market efficiency
 DB funds (and insurers) create demand for Index-linked
bonds
 Creates critical mass for certain markets – e.g. derivatives
market created by demand for effective TAA
 Foreign (developed market investors) seeking alternative
alpha
 Demanding fledgling capital markets grow up
Increases efficiency
F
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
Crowding out unlisteds
 Listed’s get disproportionate allocation of capital
flows
 Listed’s hothouse – valuations and consensus
forecasts don’t support price
 Listed’s management fees high, despite number of
listed’s service providers
 Lucrative, high margin listed fees disincentivises
unlisted investment management
 Trustees need to negotiate more
GDP’s &market caps in Africa
Country
Currency
South Africa
ZAR
467.80
18.8%
361.53
64.6%
Egypt
EGP
405.40
16.3%
52.71
9.4%
Nigeria
NGN
296.10
11.9%
46.24
8.3%
Morocco
MAD
125.00
5.0%
62.62
11.2%
Tunisia
TND
76.07
3.1%
4.71
0.8%
Kenya
KES
61.22
2.5%
8.82
1.6%
Tanzania
TZS
51.07
2.1%
1.48
0.3%
Côte d'Ivoire (BRVM)
XOF
32.85
1.3%
5.04
0.9%
Ghana
GHS
31.13
1.3%
5.53
1.0%
Uganda
UGX
29.13
1.2%
0.49
0.1%
Botswana
BWP
26.04
1.0%
1.27
0.2%
Zambia
ZMK
16.10
0.6%
3.79
0.7%
Mauritius
MUR
14.27
0.6%
2.43
0.4%
Namibia
NAD
10.69
0.4%
1.47
0.3%
Malawi
MWK
10.59
0.4%
1.33
0.2%
Swaziland
SZL
5.36
0.2%
0.10
0.0%
TOTALS
1,658.82
66.7%
559.56
GDP of continent
2,485.70
F
GDP US$bn
GDP% of Continent
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
market cap US$bn
% of market cap
100.0%
Country
Currency
South Africa
ZAR
467.80
18.8%
361.53
64.6%
Egypt
EGP
405.40
16.3%
52.71
9.4%
Nigeria
NGN
296.10
11.9%
46.24
8.3%
Morocco
MAD
125.00
5.0%
62.62
11.2%
Tunisia
TND
76.07
3.1%
4.71
0.8%
Kenya
KES
61.22
2.5%
8.82
1.6%
Tanzania
TZS
51.07
2.1%
1.48
0.3%
Côte d'Ivoire (BRVM)
XOF
32.85
1.3%
5.04
0.9%
Ghana
GHS
31.13
1.3%
5.53
1.0%
Uganda
UGX
29.13
1.2%
0.49
0.1%
Botswana
BWP
26.04
1.0%
1.27
0.2%
Zambia
ZMK
16.10
0.6%
3.79
0.7%
Mauritius
MUR
14.27
0.6%
2.43
0.4%
Namibia
NAD
10.69
0.4%
1.47
0.3%
Malawi
MWK
10.59
0.4%
1.33
0.2%
Swaziland
SZL
5.36
0.2%
0.10
0.0%
TOTALS
1,658.82
66.7%
559.56
GDP of continent
2,485.70
F
GDP US$bn
GDP% of Continent
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
market cap US$bn
% of market cap
100.0%
Country
Currency
South Africa
ZAR
467.80
18.8%
361.53
64.6%
Egypt
EGP
405.40
16.3%
52.71
9.4%
Nigeria
NGN
296.10
11.9%
46.24
8.3%
Morocco
MAD
125.00
5.0%
62.62
11.2%
Tunisia
TND
76.07
3.1%
4.71
0.8%
Kenya
KES
61.22
2.5%
8.82
1.6%
Tanzania
TZS
51.07
2.1%
1.48
0.3%
Côte d'Ivoire (BRVM)
XOF
32.85
1.3%
5.04
0.9%
Ghana
GHS
31.13
1.3%
5.53
1.0%
Uganda
UGX
29.13
1.2%
0.49
0.1%
Botswana
BWP
26.04
1.0%
1.27
0.2%
Zambia
ZMK
16.10
0.6%
3.79
0.7%
Mauritius
MUR
14.27
0.6%
2.43
0.4%
Namibia
NAD
10.69
0.4%
1.47
0.3%
Malawi
MWK
10.59
0.4%
1.33
0.2%
Swaziland
SZL
5.36
0.2%
0.10
0.0%
TOTALS
1,658.82
66.7%
559.56
GDP of continent
2,485.70
F
GDP US$bn
GDP% of Continent
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment
market cap US$bn
% of market cap
100.0%
Investors driving markets
 Pension funds demand infrastructure and greenfields





F
investments – increased packaging / preparation of
investment opportunities
Unfortunately very few venture capital opportunities offered –
deal pipeline restriction for private equity type of investments
Uncertain / opaque private equity investments and vehicles
create mistrust on part of willing long term investors,
especially in less developed markets in Africa
Need to be seen as more mainstream
Regulator to provide guidelines
Regulators and market entities need to share information and
expertise, and platforms, both in the private and listed space
agmeedah Petersen Lurie
Independent Actuary
Pensions Governance Investment