Sunday, November 29, 2020

Alexander Forbes retirement fund reaches record P1 billion mark

Alexander Forbes Retirement Fund (AFRF), umbrella pension fund in Botswana has surpassed the P1 billion mark as at December 2016.

The growth of the AFRF is said to have been driven by conducive market conditions which saw the AFRF investments performing above the domestic inflation. 

 Alexander Forbes Botswana Managing Director (MD) Paul Masie said this week that another contributor is prudent trustee decisions such as diversifying the Fund’s investment, thus reducing risk and maximizing returns.

“There has been an increase in the number of participating employers in the AFRF which has seen the fund’s membership increase by approximately 20 percent per annum over the past 10 years,” said Masie.

Masie maintains that AFRF is an attractive retirement fund for businesses due to the flexibility, affordability and convenience it offers members.  He added that the growth can be attributed to increased confidence in their offering, by the market. He said there is aggressive customer acquisition by the Alexander Forbes Financial Services team.

“The Botswana market is massive and there is ample potential for growth, with only one third of the working population formal and informal with a retirement fund in place,” he said.

Masie stated AFRF is well on its way to becoming a model umbrella pension fund in the Botswana market. He said the fund aspires to continue to be differentiated by superior customer propositions and excellent service.

He is also of the view that Alexander Forbes welcomes competition and finds it very healthy. He added that competition leads to innovation and improved customer service, which benefits the most important person in the equation, the client. Among others, Masie said they were the first in Botswana to provide viable trust management services to pension funds, the first to launch investment performance surveys, and the first to develop and implement the pre-retirement switch strategies.

“It is no wonder that from a mere pension establishment, we are boasting of a billion Pula investment portfolio with over 26 000 members. This goes to show that we are a strong brand and a leading financial services provider,” said Masie.

He spoke of offers such as life-stage model, where members who are close to retirement are exposed to the short-term fluctuations in investment returns, which are characteristic of equity investments.  He said this is not ideal, as capital preservation takes precedence to achieving capital growth in the years closer to retirement.  He added that as a result, there is a need to have a separate set of investment portfolios which enables members to reduce their exposure to equities as they near retirement age.

Masie further spoke of another offer called Member Investment Choice (MIC) which enables members to select on an annual basis, a portfolio to be invested in. He said the investment portfolios on offer have varying degrees of equity exposure and as such, varying degrees of risk.

“Projection statements provide members with an illustration of their projected retirement income, by making reference to the extent to which they can expect to replace their salary at retirement,” he said.

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Sunday Standard November 29 – 5 December

Digital copy of Sunday Standard issue of November 29 - 5 December, 2020.