The Fund Doctor

What Commodity Mutual Funds Entail

admin — Tue, 22 Dec 2009 22:41:56 +0000

The investment world is full of securities which an investor may choose from. These securities fall under different pools, among them are the mutual funds. These are pools of investment that attract many investors for mutual returns that are then divided among the investors. An investor needs to be aware of how the funds operate so that he can know when to expect his returns, or the rights he has on his investment.

Commodity mutual funds refer to a type of security that invests in commodity goods that are fast moving and which have the potential to attract good returns. In America today, there two firms that major in commodity funds. These are Oppenheimer Real Estate Fund and the Pimco Commodity real return fund. They were started a number of years ago and they have continued to thrive in the market today.

Commodity funds are further categorized into two; the hedge funds and the commodity pools that are not open to a majority of investors. One advantage that an investor can draw from these securities is that, they tend to beat inflation. This is because the prices of commodities tend to increase with inflation. As such, they are able to fetch more from the general market. They are considered to perform more than stocks and bonds.

The investment firms target goods which are always on demand, regardless of the prevailing market conditions. Things like wheat, sugar, oil, coffee, cocoa, energy, livestock and grains will always be needed as they are basic needs in the lives of many people. Pricing of commodity mutual funds is normally done through indexing, where factors such as sales per year are put into consideration.

Peter Gitundu Creates Interesting And Thought Provoking Content on Mutual Funds. For More Information, Read More Of His Articles Here COMMODITY MUTUAL FUNDS If You Enjoyed This Article, Make Sure You Read My Most Recent Posts Here MUTUAL FUNDS

Different methods of calculating your monthly mortgage payments

admin — Wed, 09 Dec 2009 13:34:57 +0000

Some people want to gather knowledge about how mortgage payments are calculated. You can do it in different ways. You can precisely calculate your mortgage payments with mortgage loan calculators. To work out your loan payments, you have to provide some information about the home loan like the loan amount, interest rate and loan term.

Why it’s necessary to calculate a mortgage payment?

The method of mortgage payment calculation gives you a better idea on how much you need to pay on interest and principal each month. Mortgage payment calculation lets you know how your loan essentially works. You can also find out whether there are any hidden costs. You would understand the amortization process of your loan. Amortization is the procedure of paying down your interest and principal balance throughout the loan term.

You would find no difficulties to calculate monthly mortgage payments for traditional FRMs (fixed rate mortgages). The method becomes complicated when you’re going to calculate an interest-only loan payment.

Using a spreadsheet to work out mortgage payments

If you truly intend to assess the full picture of a home loan, using Microsoft Excel spreadsheets can help you. If you’re quite familiar with Microsoft Excel, you can make a spreadsheet that enables you to modify the inputs and figure out mortgage payments under different “what-if” scenarios.

Online calculation of mortgage payments

Online mortgage loan calculators are the simplest means to work out your home loan payments. There are a lot of websites that offer online mortgage calculators to help you figure out your mortgage payments.

Manual calculation of monthly mortgage payments

If you’re an expert in calculations and just want to carry it out the conventional way, there’s nothing wrong in doing it. Nevertheless, it’s better that you skip this technique and rather use a personal computer or calculator.

Other crucial figures

While calculating home loan payments, you should also know some other crucial figures. These numbers determine whether you would qualify for a loan and how reasonable the associated terms would be. Lenders might fix minimum criteria for you to be approved for a loan. Some of the important numbers are your debt-to-income ratio, your credit score and your loan to value ratio.

Sweden Adds Backing to UK Call on AIFM Draft Directive

admin — Tue, 04 Aug 2009 21:02:29 +0000

Lord Myners returned from his meeting with Swedish counterparts late last week with the support of the Swedes who assume the EU Presidency on July 1st.

While this is good news for the hedge fund and alternative investment industry, there is still a great deal of work left to do to unravel the draconian and politically motivated piece of draft regulation. The French and Germans are on notice that there will be intensive lobbying efforts by the UK Government to ameliorate the proposed legislation, but is it simply the UK with it’s hedge fund stable which has the most to lose?

Capital will move to where it can do business most effectively - odd the principal of freedom of capital movement across borders should have been ignored by the EU legislators themselves. A growing chorus of hedge funds are threatening to upsticks and move operations elsewhere if the legislation goes through and realistically, there isn’t much to stop them - hedge funds are hardly mega-employers and there are pools of skilled talent for back-office functions elsewhere in the world (including Hong Kong where ComplianceAsia is based).

While the French and, to a lesser extent, the Germans, are going to be subjected to intensive lobbying and political back-scratching which is par for the course in promulgating legislation, both the promoters and critics of the AIFM should be aware they are not the only players in the EU legislature.

Nor are hedge funds the only “forbidden” fruit.

Ireland, for instance, has voiced concerns over the draft Directive, not least because of the number of hedge funds administered out of Dublin, but also due to the wide-ranging net of the AIFM definition of “Alternative Investment Funds” (AIF’s). The definition of AIF’s are “any collective investment fund not required to be authorised as a UCITS” - in other words, any investment fund other than securities fund!

Expect battle-lines to become clearly defined and it is going to be interesting to see how proponents of the measures respond to calls they do not know what they are doing.

For the latest in compliance and regulatory news from the US, UK, EU and the Far East visit ComplianceAsia’s blog. This article was commissioned by ComplianceAsia, the leading APACS region provider of outsourced compliance support for leading banking and financial institutions operating in the region. You can keep abreast of the best of international regulatory news from Washington D.C., New York, London and around the world at http://complianceasia.squarespace.com

Guest Post by Karl Hindle

All Worldwide Rights Reserved http://bigridgemedia.com

No Pension in Irish Construction Industry - 7 Most Common Reasons

admin — Sat, 01 Aug 2009 22:58:08 +0000

Pension’s Tips: It is said that people either “live too long or die too young”, and nowhere is this more typified than in the Construction Industry, where up to recently, both the safety record and thePension planning record had been nothing short of appalling.

On the one hand, the fatality and injury record of workers in the Irish Building Industry was one of the highest in Europe (in 2001, 28% of all workplace fatalities were Construction Industry related), while those who were lucky enough to have survived working on Irish Construction sites faced a very uncertain future as they neared retirement.

While the authorities have made some strides in addressing the Construction Industries safety record in the recent past, there is still considerable scope for improvement with regard to adequate and proactive Pension Planning (in an IAPF survey dated October ,2005,it was found that nearly the entire Irish population was dependant on the statepension)While a recent IMPACT Trade Union report found that in Ireland, there are currently 5 people of working age for every person aged over 65, but that figure will fall to 2 to 1 by 2050,causing a huge funding crisis.

The lack of Pension planning is a symptom of a larger Irish malaise, namely their totally reactive nature to nearly everything. This especially applies to Construction Industry Pensions, where despite extensive publicity on the need for adequatePension planning, the Pension expertise available and the negative effects of no Pensions being in place at retirement, excuses still abound for doing nothing. In an effort to be seen to do something, the Government is even rumored to being looking at making Pension funding compulsory.

In over 25 years of Pensions planning, here are the 7 most popular excuses I’ve come across in the Construction Industry for not planning a Pension.

* I can’t afford it
* I’m too young/old
* “Someone else” will provide for it
* I’ll do it “later”
* There’s a state pension
* I don’t want to think about it
* I’ll be dead by then

I can’t afford it — expansive pension ……ask yourself can you afford NOT to? Waiting until you can afford it will never happen. The minimum monthly premium for a self employed Pension is €25 gross, or with tax relief at 20%, €20per month ……that’s €1.00 per day. Given that the minimum Lottery ticket price is €1.50 per go, and there are absolutely no guarantees whatsoever with that, €1 is a small price to pay for securing your future and security of mind, isn’t it?

Insurance go first! I’m too young/old ….you’re never too young, or old for that matter, to start to proactively secure YOUR future. The earlier you start, the longer your funds have to grow and appreciate in value, while even starting much later in life will give you tax relief and help you to exercise SOME power over your finances.

A plan for my Pension? “Someone else” will provide it …………who, precisely? And why should they? While an employer may contribute to your Pension Plan, ask yourself how much of a benefit you’d expect to get, would it be guaranteed, and if so, for how long? Would you be happy to have “someone else” pick your clothes, choose your car or have any other say in your life - but if you don’t plan for your Pension, “someone else” WILL be deciding your future.

I’ll do it “Later …… look at the cost of delay - to provide a pension of €2,000 per month, a 20 year old would need to pay €270 per month into a pension plan, while a 40 year old saving for EXACTLY the same amount would need to pay €951 per month - FRIGHTENING, isn’t it??

There’s a State Pension …….there is alright. As of Jan, 2007, that stands at the princely sum of €209.30 per week. Now ask yourself, given the ever increasing cost of accommodation, transport, food, communications, entertainment etc., if you were relying on the State Pension ONLY, would you be LIVING or EXISTING?

I don’t want to think about it…….fair enough, that’s your prerogative, but burying your head in the sand on the Construction site won’t make planning for your future go away. Can you imagine a Builder deciding they didn’t want to think about something on a Construction site……would you be happy to work there?

I’ll be dead by then …perhaps you will, but suppose you’re not? Can you imagine HAVING to continue doing manual labor out of dire economic necessity? Or what if you’ve worked all your life and in spite of your best efforts, face 30 years of retirement?

Another alternative the Irish Government are looking at, as pointed out in a recent IBEC report in Feb 2006, is that they may increase the minimum retirement age to 70 or 75.Can you imagine the potential effect this would have on the Construction Industry? So, as an Irish Building worker, why don’t you take control of your future, ignore the 7 most popular excuses outlined above, and make your Pension THE KEYSTONE of your financial future……and if you need another incentive, try living on €209.30, and nothing else, for a few weeks!!!

For general pension’s information, please visit the website of the Irish Pensions Board or for Information relating specifically to Pensions visit Irish Construction Industry Pensions.
Ireland’s premier supplier of Pension and Retirement planning for those contractors, suppliers and sub-contractors who work in the Irish Construction Industry

Pensions Guide: State Pensions

admin — Wed, 07 Jan 2009 15:49:52 +0000

The most important financial decisions you’re likely to make in your life are those concerning your retirement. To have a secure future with a comfortable standard of living after you’ve stopped working, you’ll need to plan your finances carefully.

Pensions are becoming more and more important as people now live longer into their retirement. Lifestyles have also changed - people often take out mortgages later in life than they used to, meaning that they may still have a mortgage to repay when they stop working. And as people are experiencing better health and longer retirements, they want to have a reasonable disposable income in order to enjoy more leisure activities in their later years.

This is the first of two guides outlining the fundamentals of pensions. It’ll help you understand more about state pensions and how they are calculated. The second guide focuses on private pension schemes. These articles do not constitute financial advice and should only be used as an introductory informational guide to pensions. For advice on how to plan your finances for your future, seek professional advice from an independent financial advisor.

Definition

First, back to basics - what is a pension? It’s a regular source of tax-free income for you to live on when you retire. As contributions towards your pension fund during your working life also receive tax relief, it’s a more tax-efficient than other methods of saving.

The government department responsible for managing and administering state pensions and other pensions related benefits is The Pension Service, which is part of the Department of Work and Pensions.

State pension

The government provides a state pension, which can be claimed by men over the age of 65 and women over the age of 60 (although this will increase to 65 in line with the male pension age by 2020).

Not everyone qualifies for a state pension, and even those who do will receive different incomes depending on their working history. Entitlement is calculated according to the number of national insurance contributions (NICs) you (or your partner/spouse) have paid, which are converted into ‘qualifying years’. You’ll need to have worked and paid contributions for around 90% of your adult working life in order to receive the full state pension. If you’ve been out of work for long periods in order to bring up a family or look after someone, you’ll be compensated for missing NICs through ‘Home Responsibilities Protection’. If you’ve been out of work for other reasons and have been claiming benefits such as jobseeker’s allowance, or income support, the government will have paid your NICs on your behalf for the period(s) in which you claimed benefit. The minimum you need to get the basic state pension is 25% of the qualifying years. If you have anywhere between the minimum and maximum amount of qualifying years, the amount you receive in your state pension will be adjusted in relation to how many qualifying years you have, so the more you have, the better. Those who have less than 25% of qualifying years won’t be able to claim any state pension at all, although there are other government pension benefits to assist those on low incomes in retirement, such as pension credits or the Over 80 pension.

Additional state pension schemes

In addition to the basic state pension, the government has a top-up scheme to enable people to increase the amount of pension income they receive.

SERPS (State Earnings-Related Pension Scheme)

Until April 2002, SERPS was the government’s second pension scheme, which allowed anyone earning more than £75 per week to make additional NICs. The level of NICs paid was earnings-related. However, the government deemed SERPS unfair on people with low incomes and those with big gaps in their employment history, so it was crapped and replaced with the Second State Pension in 2002 with the aim of allowing everyone to save more for their retirement.

SERPS gave the option of ‘contracting out’, which could be done for one of two reasons: in order not to pay the additional NICs, or to put the additional NICs towards a private pension fund.

Second State Pension

People who were paying into SERPS will now be paying into the second state pension and may therefore receive their additional state pension from two different sources when they retire.

The Second State Pension is still linked to earnings. However, it’s calculated in a way that provides better support to those on low incomes, or people who don’t have constant work because of illness or disability. In these cases, the government tops up their credits to a flat rate of £12,100, so they will receive NICs as if they had earned an annual salary up to this amount.

As with SERPS, it’s possible to ‘contract out’ of the Second State Pension, either to stop paying the additional NICs or to put them towards your own pension fund.

Finding out how much your state benefits are worth

To help you plan your savings towards your retirement, the government offers state pension forecasts to let you see how much you’ll be likely to receive as retirement income. Visit the Government Pensions Service website for more information (www.thepensionservice.gov.uk).

New survey triggers concerns for pension safety-net

admin — Sat, 03 Jan 2009 19:27:37 +0000

It has been revealed that up to 91% of final salary schemes cannot afford to pay out benefits, with the under-funded schemes carrying deficits of over £228 billion.

The PPF takes around £700 million from companies every year, but this has proved too little and doesn’t cover its liabilities. The PPF has a deficit of around £550 million.

The PPF has already carried the weight of 62 schemes that failed, which include Woolworths, and Lehman Brothers.

There are now growing concerns that further failed schemes will result in the PPF to collapse, leaving future companies at risk of bankruptcy vulnerable to loss of employee pensions.

The government has been called on by The National Association of Pension Funds to back the scheme and act as a safety net, but the government has yet to comment.

NAPF Chief Executive, Joanne Segars, said: “In these exceptional times, maintaining confidence and security in pensions is vital so it would be a sensible measure for the Government to be the ultimate guarantor of the Pension Protection Fund.”

Vince Cable, Treasury spokesman for the Party, said: “I get a very strong sense that this is the Titanic hitting the iceberg. It is potentially very vulnerable in a serious recession, which is what we are now getting into. Companies won’t be able to sustain the fund in its present form. The Government has to be explicit that it is standing behind it.”

The potential issues were raised after a new survey from Punter Southall revealed that 60% of pension schemes are unaware of how the recession is affecting their funding position.

Investment bottelnecks removed for the Mid- Atlantic Branch of Angel Investment Network

admin — Wed, 31 Dec 2008 11:43:52 +0000

Read the papers today, and you’ll feel like start-ups are a rare breed in 2009. Many sources say less people are starting up companies, albeit successfully too – citing the lack of investors available as one of the top reasons. But perhaps they are not looking in the right places.

A paper in Philadelphia (Philadelphia Inquirer & Daily News) recently did a story in which a start-up CEO almost seemed to feel like securing angel investment was easier in this market than before. And it makes sense, since less competition combined with more places to look for funding make this a good time for companies to secure investment.

It is true that angel investors are becoming more cautious, and one will need a strong, convincing business plan (or some already existing activity) in order to secure such funding, but this has always been the case. However, sites such as the Mid-Atlantic Investment Network help potential entrepreneurs and existing start-ups alike find more channels in which to reach these investors.

Many companies will look to raise “Seed Capital” from a wide variety of courses, including friends and family. But the Mid-Atlantic Investment Network allows members to look beyond that, with the ability to broadcast your plans to other potential investors online.

While technology remains one of the top niches in angel investment (such as the recent development by an entrepreneur in Maryland to develop software that uses facial recognition technology to determine who can see the content on-screen), other fields are also attracting entrepreneurs and angel investors these days. Our network has active investors and entrepreneurs in fields such as Real Estate, Retail, Business Services, Transportation, Health Care, Entertainment, Agriculture and more.

A wide range of investors are members, including various angel investors from within Mid-Atlantic regions such as Delaware, Maryland (including Baltimore), Pennsylvania (Philadelphia, Pittsburgh, etc), Virginia, West Virginia and Washington D.C, but also features investors located across the country and internationally.

Join the Mid-Atlantic branch of the Angel Investment Network today and find someone to help get your business off of the ground.

What are Hedge Funds and Starting Your Own Hedge Fund

admin — Wed, 24 Dec 2008 19:21:58 +0000

WHAT ARE HEDGE FUNDS?

www.turnkeyhedgefunds.com

In the securities world, the term “Hedge Fund” does not necessarily imply any use of “hedging” as commonly understood; for example where commodity traders use options to “hedge” a commodity position. Presently, in the securities world the term “hedge fund” refers to any type of Private Investment Company operating under certain exemptions from registration under the Securities Act of 1933 and the Investment Company Act of 1940. “Hedge Funds” are often referred to as “alternate investment vehicles” and are tailored to the needs of sophisticated, high net worth private investors. A Hedge Fund is generally structured as a limited partnership having a general partner responsible for the investment activities and day-to-day operation of the fund, and limited partners who are the investors supplying capital but not participating in trading or operations of the fund. The limited partners have limited liability. That is, their exposure to loss is limited to their investment. The General Partner has unlimited liability and is liable for the activities of the partnership. The General Partners principals limit their liability through the use of a corporation or limited liability company as the General Partner. (Of course, the principals cannot limit their liability from the application of the anti fraud provisions of the Federal Securities Laws.) All of the investors’ capital is pooled and is utilized by the General Partner or Investment Manager to implement its trading or investment strategy.

Hedge Funds are “Non-Public Offerings.” The private offering exemption prohibits Hedge Funds from making any public offering. Therefore, Hedge Funds are prohibited from general advertising and generally secure investors through word of mouth, consultants, registered representatives, brokers or investment advisors. Hedge Funds have investors that are either “accredited investors” or “qualified purchasers.” In general, the Federal Securities Laws define the terms “accredited investor” and “qualified purchaser” in terms of minimum asset and income threshold that must be met before they qualify to be investors in the Hedge Fund. Since the Hedge Fund generally limits investment to “accredited investors” or “qualified purchasers” both of whom are required to meet certain minimal asset and/or income thresholds, the Fund Manager or administrator must gather background information on potential investors to determine whether they meet the minimum requirements to be “accredited investors” or “qualified purchasers.” By making a non-public offering to certain kinds of investors, (accredited investors or qualified purchasers) the investment vehicle will be exempt from registration requirements of The Securities Act of 1933 pursuant to the safe harbour provisions of Rule 506 of Regulation D. Where the investment vehicle is limited to no more than 100 investors, and otherwise complies with the safe harbour provisions of Regulation D, such an investment entity is exempt from the extensive regulation pursuant to Section 3(c)1 of The Investment Company Act. Section 3(c)7 of The Investment Company Act offers a similar exemption to private investment companies with “qualified purchasers” as investors.

As an unregulated entity, the Hedge Fund Investment Manager is free to undertake greater risk on more volatile positions thereby exposing investors to potential substantial profit as well as substantial losses.

Typically, Hedge Funds provide for the payment of an Incentive Allocation or Performance Fee to the hedge Fund Manager/General Partner. Performance Fees range from 20% to 40% depending on the strategy employed by the Hedge Fund Manager. Typically, the Performance Fee provides for a “high water mark” structure which provides that incentive fees are paid only to the extent that the fund continues to meet or exceed the “high water mark.” Additionally, typical Hedge Funds include Management Fee of 1% to 2% of all assets under management.

Generally there are two kinds of Hedge Funds. On the one hand, there are the huge worldwide funds operated by charismatic managers such as George Soros. On the other hand, there are small boutique-styled Hedge Funds identified with a particular segment or investment strategy. The Fund Manager’s expertise, experience and background in recognizing investment opportunity will dictate that fund’s particular niche. For example, there are the “Biotech Hedge Funds” which are managed by experienced and highly qualified investment managers who may also hold advanced degrees in science and medicine. There are “Tech Hedge Funds” specializing in the technology sector managed by individuals having specialized experience trading in that sector. With the emergence of day trading and the availability of the trading technology, a number of floor traders and brokers are leaving the traditional brokerage and exchange venue to participate in the computer screen trading phenomena.

The boutique “Hedge Fund” typically relies on the particular skill and expertise of the Investment Manager or Trader. The highly specialized Investment Manager may utilize a “Sector” style of investing focusing on a particular industry or economic sector. Conversely, an Investment Manager utilizing a “Market Neutral” style will maintain a portfolio of securities which are generally ½ short and ½ long. Some Investment Managers utilize a “Value” investment style based upon assets, cash flow and book value; while other Investment Managers follow the “Emerging Markets” style and invest in emerging and foreign market equity and debt. “Trading” funds utilize an opportunistic investment style taking advantage of market trends, events and opportunities for short term profits. Each Fund Manager develops and uses a particular investment style that is unique to the experience, expertise and personality of its manager.

Unlike Hedge Funds, Mutual Funds raise money publicly; are highly regulated by the Securities and Exchange Commission, the Internal Revenue Service and other agencies; and offer investment diversification and are restricted from purchasing many types of derivative instruments, leveraging, short selling and other kinds of transactions.

Unlike the Mutual Fund Managers, the Hedge Fund Manager generally invests in the fund that they manage and participate in profits as well as risks with their investors. Unlike the Mutual Fund fee structure (which is determined on assets under management) the Hedge Fund Manager receives incentive allocations on performance.

www.turnkeyhedgefunds.com

Social Security Administrative Costs: a Receipe for Collapse of Sierra Leone’s Pension Program

admin — Thu, 11 Dec 2008 12:49:06 +0000

OVERVIEW:

As the nation awaits the second actuarial evaluation of the National Social Security & Insurance Trust (NASSIT), a thorough analysis and understanding of the initial actuarial valuation report conducted by Canadian based actuarial firm Regie Des Rentes Du Quebec (RRQ) for the period ending December 31, 2004, is instructive in assessing the performance and future viability of the nation’s pension scheme.

Pursuant to Article 47 of the National Social Security & Insurance Trust Act, 2001 an actuarial evaluation of the pension scheme is by law required every 3 years during the first ten years of the pension scheme and once every five years thereafter. The scheme was initially implemented in 2002 with the first actuarial valuation performed in 2004. The second statutory valuation should therefore be conducted by 2007/2008 and an actuarial report issued soon thereafter.

The 2004 RRQ actuarial studies report while acknowledging the general good financial condition of the scheme, as expected of start-up schemes without pension payment liabilities, however highlighted areas of concern and deficiencies that both Sierra Leonean policymakers and pension participants must be made aware of and requisite steps taken to address in order to forestall the Trust’s failure and potential bankruptcy.

Aside from the need for growth in the insured population and the need for more scheme experience data, the actuarial report paid especial focus on the exorbitant administrative expenses and costs and the management of investments, as areas of concern requiring corrective measures.

ADMINISTRATIVE COSTS

An analysis of the pension scheme’s administrative costs, according to the actuarial report, reveals that NASSIT’s “administrative expenses compared to insurable earnings were higher than the level expected in the inception report ”.

It is worth noting that at inception of the scheme an industry best practice expenditure for administrative costs was pegged at 1% of insured earnings as recommended by the International Labor Organization (ILO).

However, since 2002 when administrative costs were at 1,691 billion Leones, the administrative costs have progressively increased to 3,250 billion Leones in 2003 and to a whopping 6,407 billion Leones in 2004. As noted in the RRQ actuarial report, the 2004 costs exceeded the ILO recommended 1% for the scheme’s administrative costs by a proportion of 230%.

In the recently published annual report for 2006, NASSIT reported general administrative expenses at 15.3 billion Leones while the Trust’s payments in pensions amounted to a paltry 1.9 billion Leones. The 15.3 billion Leones in administrative costs represented an increase from 14.4 billion Leones in the previous 2005 fiscal year. Thus as of the year 2005, administrative costs represented 5 percent of the insurable earnings of the scheme. Such a ratio glaringly is economically untenable as even when compared with other African countries 1.5% for administrative costs, the trajectory of NASSIT’s administrative costs remains one of the highest in the world.

The amoebic growth in the Trust’s administrative costs has continued to balloon as figures for the year ended 2007, revealed that the stratospheric sum of 22.1 billion Leones was expended as administrative costs and expenses.

While acknowledging that nascent pension schemes generally have higher administrative costs at beginning than matured schemes, and factoring that the “initial seed money of 4.5 billion Leones provided by the government for setting up of the Scheme was fully refunded by the end of the third year”, the continued growth in administrative costs with no apparent oversight or checks and balances by the Trustees / Board of Directors reflects a lack of good governance controls and potential inefficiencies that must be addressed and corrected.

For should this trend continue, the Trust will be rendered bankrupt and the country, the statutory guarantor of the pensions will be saddled with unfunded pensions by the time the equilibrium period ends and pension liabilities are at their peek. As fiduciaries, the board members must be seen as exercising their fiduciary duties on behalf of the pension scheme’s participants- the workers of Sierra Leone.

STAFF COSTS

Staff costs represent a large percentage of the administrative costs and were estimated to consume more than 55% of total expenditures of the pension scheme. For example, payroll costs increased from 5.1 billion Leones to 8.2 billion Leones from 2005 to 2006. As at the period ending December 2006, the scheme employed 227 employees representing a net employee increase of 6 from the prior year. In 2005 the scheme reported a total of 221 employees on its payroll. The 6 new employees the scheme employed in 2006 in addition to whatever cost of living increases in salary paid the existing employees could most certainly not explain the exorbitant increase in the wage bill of the scheme.

As of the second quarter of 2008, the Trust reportedly has a total of 275 employees, an increase in its employee rolls from 227 in 2006.

Moreover, in addition to staff costs, the remuneration of key management personnel salaries and allowances substantially increased from 1.6 billion to 2.2 billion Leones from 2005 to 2006.

According to the NASSIT staff matrix, the scheme has 8 executives and 13 senior management positions. If “key management” refers to only these positions, it thus represents 21 personnel who over a one year period received as salaries and remuneration an additional humongous sum of 2.2 billion Leones from the Sierra Leone workers pension fund.

GENERAL COST

Aside from staff costs as reviewed above, the amorphous category of “General Costs” represents about 30 percent of the scheme’s expenditures. Whilst initially at 543 million Leones in 2002, general costs expenditure had ballooned to 963 million Leones in 2003 and to an exorbitant 2.1 billion Leones in 2004.

It should be noted that while administrative costs by the year 2004 represented 95.4 percent of total benefit expenditures and 24.0 percent of contribution income of the entire pension scheme, the continued fiscal viability of the pension scheme is greatly at stake as an inordinate amount of contributions of workers hard earned wages seem to be spent on the scheme’s management and staff expenses.

ANALYSIS OF INVESTMENT PORTFOLIO

Since a major source of financing for the Trust is investment income, which derived from the right investment mix and returns determines and ensures the scheme participants level of pension benefits, this article will not be complete without an analysis of the NASSIT’s current investment strategy.

The scheme’s investment strategy policy has been adjudged in the actuarial report as economically and actuarially well designed. The devil however is in the implementation of this well designed policy. Especially as relates to stocks in companies, the absence of an adequate financial infrastructure where shares and stocks can easily be traded to free up cash flow exposes the Trust to additional investment risks.

Despite this shortcoming in the country‘s financial environment, the Scheme has poured over 39 billion Leones into equity investments, even though the country does not have a functional stock exchange.

A review and analysis of the types of businesses and ventures the Scheme’s equity investment has been directed into causes risk concerns for achievement of the expressed strategic objectives of the investments portfolio and for the continued viability of the scheme.

The Scheme in 2006 increased its equity asset mix from 11.4% in 2005 to 20% in 2006. This category represented, aside from Treasury Bills, the largest percentage investment by the Scheme.

LONG TERM INVESTMENTS

As of 2006, the Scheme’s long term investment portfolio totaled 39.6 billion Leones, comprised of equity investments in the following:

1) Debentures in SierraBlocks of 8.2 billion Leons.

2) Equity investment in SierraBlocks of 7.1 billion Leones.

3) Equity investment in Barock Investment of 7,268,000

4) Equity in Regimanual Gray SL Limited of 6,000,000.

5) Equity in Gouji Property Investment of 9,129,992.

6) Equity investment in Eco Bank of 3,033,917 Leones.

7) Equity investment in Kimbima Hotel of 5,296,414.

Equity investment in Sierra Leone Brewery of 7,005.

The scheme’s investment liability exposure in the cement block making company, SierraBlocks represents a 60% ownership shares with a concomitant 60% of liability. Such exposure of the scheme’s capital and considering the high costs of the homes Regimanuel Gray is selling in Goodrich must serve as a warning signal that returns from this venture are likely to fail to conform to minimization of costs and risks associated with investments-a core objective of the scheme‘s investment policy.

The scheme’s experience with the Gouji Property Investment when it prematurely recalled its equity investment and reportedly only received a portion of the Trust’s initial capital investment is highly instructive.

Currently, contribution accumulation represents the main source of asset increase in the scheme’s portfolio. Since the scheme is young and growing this trend will continue. However, the laws of diminishing returns will very soon set in and contributions not only will remain stagnant but will inevitably regress resulting in an adverse impact on the scheme’s investment mix.

CONTRIBUTION DELIQUENCIES

As a mandatory pension scheme all employers and employees are required to contribute into the Trust. However, an alarming trend witnessed over the past five years of the Trust’s existence shows that government departments and parastatals are the greatest delinquents with mounting arrears of contributions owed to the Trust on behalf of their workers. For example, as recorded in the Trust’s 2006 annual report, total contribution delinquency increased from 9.1 billion Leones in 2004 to 12.9 billion Leones in 2006. This amount subsequently increased to 16.2 billion Leones in 2007 and as of the second quarter of 2008, the contribution arrears stood at 19.4 billion Leones.

The main reason adduced for this delinquency is the non-compliance by government ministries, departments and parastatals whose contribution arrears rose from 2.1 billion Leones in 2004 to 5.5 billion Leones in 2006. The trend of non-compliance by parastatals especially continues unabated as recent statistics for the second quarter shows that their non-compliance is currently at 10 billion Leones.

With all the statutory instruments at its disposal, the Trust must be aggressive in ensuring outstanding contributions are immediately recouped. A reduction and elimination of the arrears must be a benchmark in assessing management’s productivity and efficiency. The Sierra Leone landscape is dotted with government services institutions and companies that have failed by their inability to ensure user-service payments are timely collected for services, be it insurance, electricity, water supply and other public services. At this rate and trending, NASSIT is setting itself up for the same demise.

PROPOSAL FOR EXPANSION OF THE INSURED POPULATION

The participation of Sierra Leone’s diasporas in the country’s pension scheme, the NASSIT, represents one such creative and out of the box thinking that management and the government must urgently explore.

Diaspora participation in NASSIT could be achieved by a system of purchase of credits in foreign currencies, into the pension scheme, modeled on the concept of “Diaspora Bonds”; where countries raise financing from their overseas diasporas through a debt instrument .

However, unlike a debt instrument, the sale of credits into the NASSIT pension scheme allows diasporas to participate in the nation’s social security system with benefits inuring to both the diaspora participant and the NASSIT. In the case of the diasporas it ensures:

Patriotism, as participation affords continued connection to the home country.

Satisfaction of contributing to and participating in the home country’s national economic growth.

Protection as a risk management tool, as the survivor’s benefit component of the pension scheme will afford benefits to beneficiaries in the home country, in the event of the death or disability of the diaspora participant.

In the case of the country and NASSIT, it provides:

Extension of the covered population, providing additional private sector capacity, which the scheme desperately needs to meet actuarial projections.

Access to foreign capital remittances, as contributions would be made in foreign currencies.

Risk diversification, as the foreign capital infused into the scheme could be invested in foreign investments and international bonds, stocks and indexes.

Needed capital for developmental programs such as the current NASSIT low cost housing project.

CONCLUSION:

The establishment of the pension scheme in Sierra Leone represents a singular achievement in public policy implementation over the past 30 years and if properly executed and managed long-term will serve generations of workers and contribute positively to economic and social development of the country. It is thus in accord with the tremendous expectations for success of the scheme that the above critique and suggestions for curtailing the run away administrative costs of the Trust are been proffered not only to management but especially the Board of Directors.

Holiday Loans: Invest Fund to Make Your Tour in Peace

admin — Mon, 08 Dec 2008 15:43:32 +0000

Expensive traveling and tour during the holiday season in particular has made holiday a harrowing affair. If you are one the shoppers wondering how you are going to pay for it all, Holiday Loans may tempt you. These loans are marketed to people at a time when they are probably most financial vulnerable.

As per your convenience and demands, these loans come in secured and unsecured forms. Secured form of borrowing can bestow you with a good amount of money on cheap rate for a longer period. With the fund, not only you can make your tour free from any kind of financial fuss but also give a boost to your usually fiscal affairs. On the other hand, unsecured loans in which borrowers do not have to place any of their worth assets as of security for the loan. For the reason, a small fund is granted for a shorter period. More so, obtaining the sum gets a little costlier.

With the raised fund, you can cover the cost of your holiday expenses. The expense encompasses traveling charges, food and lodging, and other sundry outlays.

These loans are not bound to a particular class of people. People having adverse credit records can also avail the benefits of the money provisions. All that they are required is to have shop around for the best possible finance product. In this prospect, quarters of lenders are available online and offline, processing online though is gaining precedence. It saves a great amount of your time and energy, and makes your loan approval fast.

So, taking a leave from your hectic day-to-day schedule is good. But spending for momentarily with your family or dear one at your dream place can be funded by holiday loans. Such financial packages give relief from occurring cost of expenses throughout your tour. And you spend some days snugly successfully.