4.7.
To find out how the contributions funds are invested towards the Socio-Economic
Development of Rwanda
The Board and Management have a legal and fiduciary obligation
to act in the best financial interest of the Fund's beneficiaries and to
exercise the highest standard of care. This must override all other
considerations. Members' contributions and Investment earnings are the most
important funding source for the Fund. Therefore, investment policies and
strategies are vital to all of the Fund's stakeholders. Investment policy
establishes eligible investments, asset class weights and the amount of
discretion given to management. These factors are the principal determinants of
risk and return. As such, investment policy plays a crucial role in determining
the extent to which benefit obligations can be offset by the Fund's investment
earnings. On a long-term basis, a low risk investment policy for the Fund will
earn low rates of return. On the other hand, a high-risk policy would be
expected to provide a higher rate of return but may lead to unacceptable levels
of return volatility. It is therefore critical that the investment policy
establishes a balance between the Fund's risk tolerance and return objectives.
The goal of this investment policy statement is to establish guidelines, which
ensure that the Fund is managed within a return on investment at a high
level.
4.7.1 Investment vehicles
at SSFR
NSSF Management is to manage the Fund using a multi-product
platform, which uses both internal staff as well as a multi-manager structure
of external fund managers. The selection and monitoring of external managers is
the responsibility of NSSF Management. The Board expects that, in aggregate,
the use of these different products will return approximately 200 basis points
(2%) per annum above inflation. These descriptions will be reviewed on a
regular basis and updated when necessary but not later than three years.
4.7.2. Permissible
investments
In the case of all fixed income securities, a credit rating is
to be assigned and the 182-day T-bill rate is to be used as the benchmark for
182-day instruments, 364-day T-bill for one year instruments, while for
instruments more than one year, the coupon rate or current Yield to Maturity
(YTM) will be used as bench mark for the return on the instruments.
After analyzing how the
contributions funds are invested towards the Socio-Economic Development of
Rwanda, the researcher discovered that The asset classes of permissible
investments are defined as follows:
Money Market: All debt securities under one
year with at least an investment grade credit rating or offered by an
institution that meets National Bank of Rwanda minimum capital requirements.
Debt Securities: All bonds, debentures, notes
and other debt instruments over one year in term secured by a guarantee or
charge on the assets of the issuer. The debt issues may be either public
offerings or private placements restricted to institutional investors.
Commercial Mortgages: First mortgages in
major Rwanda urban areas on income producing Properties
Public Equities: All securities of publicly
traded companies.
Real Estate: Investments in income producing
properties located in major Rwandan cities or municipalities that are expected
to produce an attractive return over a long-term period.
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