The NASSIT investment is rich

The NASSIT investment policy is drafted to serve as a guide and strategy to the National Social Security and Investment Trust (“NASSIT”) investment undertakings; developed to serve as a basis for the management of investment and assets of the Trust.

NASSIT one of the few institutions that was established by an Act of Parliament, Act No. 5 of 2001, to “provide retirement and other benefits to meet the contingency needs of workers and their dependants” and is thus one such invaluable assets developed by the country in post war Sierra Leone. Thus, the Trust shall invest according to the “its funds to enable it meet its present and future financial liabilities, i.e. payment of benefits” in particular. 

It is good to know that the primary objective of the investments is to ensure that the condition of solvency necessary to achieve the Trust’s obligations always exists. The investment process, therefore, is based firmly on the concepts and best practices in the management of social security funds which the company has to a very large extent exhibited over the years in the vast many of its investment undertakings.

The benefits provided under the Scheme are denominated in monetary terms; which makes it important for the Trust to maintain the real value of its funds, as well as a certain level of liquidity to make these payments feasible and explainable to its clientele and the general public to whom it is large answerable to. Very important also to the payment of meaningful benefits is the Indexation of the benefits, which are linked to the increases in the wage levels over time; drafted to suit the highs and lows in the beneficiary’s income. 

The Board of Trustees adopted the Investment Policy Statement and Strategy to ensure that: all stakeholders understand the aims and objectives of the investment of the Trust’s assets; and investments are structured such that monitoring and evaluation of performance is objective and transparent as evidence in the considerable public education drive of the company and the open policy it operates on in terms of providing the needed education and information to its clientele, a one of its kind customer care initiative in the country.

The scheme as has been made clear time and again, is financed by contributions from employers and employees, penalties from defaulting establishments and investment income. The Trust incurs expenditures in the payment of the Scheme’s defined benefits, including old-age pensions, invalidity benefits and pensions to the survivors of contributing members. The Trust also incurs expenses in the administration of the Scheme from the same fund provided by the contributors.

The actuarial review of the Scheme projected a financial equilibrium period of twenty years, given constant contribution rates of 15 percent and a rate of return on investments that equals the growth rate of wages plus a margin of 2 percent according to information made available by The Trust.

The assets of the Fund primarily consist of accumulated surpluses of contribution and investment income over benefit payments and administrative expenses. The Trust, therefore, builds its assets to match current and future liabilities as the scheme is partially funded. These assets shall be held in various classes, ranging from cash and bank balances to equity stocks and real estate.

The nature of the assets and liabilities of the Fund are long-term. In the short to medium-term, only a small fraction of the Trust’s longer-term liabilities are expected to fall due. Hence, in the medium term, the Trust shall go overweight in potentially high risk investments with significantly higher long-term returns.

The portfolio mix has been determined against the backdrop of the Trust’s Investment Objectives, the Risk Limits, and Liquidity Requirement of the Scheme. It sets the broad medium-term targets of the various asset classes.

The main function of the Trust is to provide retirement and other benefits to meet the contingency needs of workers and their dependants. The benefits provided under the Scheme include: Old age pensions and gratuity, Retirement grants, Invalidity pensions, Invalidity grants, Survivors grants, Survivors Pension.

The NASSIT Scheme is financed from three sources:  Contributions from Employers and Employees; Investment Incomes; and Penalties.

Section 7(1) and (2) of the National Social Security and Insurance Act No. 5 of 2001 states that “Subject to the approval of the Board, the Trust may invest any part of the fund not immediately required to be expended to meets any of its obligations under the Act”. Thus, being partially funded, it is important to of maximize returns on investment for a ‘steady state’ financing under the current contribution regime. The Actuarial Report on the “Design and Financing of the National Social Security and Insurance Trust Fund” estimated the rates of returns on the investment of reserve funds at 15 percent in Year 1, 14 percent in Year 2, 13 percent in Year 3 and 12 percent from year 4 onwards to maintain and Equilibrium Period of twenty (20) years.

The main purpose of investing the Trust’s funds is to ensure that the welfare of members of the scheme is protected. The strategic objectives of the investments include: to maximise the real value of the Trust’s assets and provide current income consistent with capital preservation and appreciation, as well as the maintenance of liquidity; to minimise the costs and risks associated with investments; and to contribute to the economic and social development of the country.

The Trust seeks to achieve these objectives by a careful selection of investments that guarantee requisite short-term liquidity, ensure long-term capital appreciation and minimise overall risk while targeting crucial sectors of the economy with high growth potentials. The Board is, therefore, utilizing an investment strategy underpinned by prudent asset allocation and targeted investments in critical sectors, to: (i) achieve a rate of return that will guarantee the Trust’s ability to meet its liabilities as they fall due; (ii) mitigate existing market risks; and (iii) serve critical social and economic needs.

The Board of Trustees is ultimately responsible for the investment of all NASSIT funds. It has the responsibility for establishing broad policies for all aspects of investment operations.

Management, assisted by the “Investment Committee,” shall carry out thorough analyses of proposals for the Trust’s investments, prior to consideration by the Board. The Board shall, therefore, maintain a ‘macro’ perspective, focusing on important policy issues, monitoring progress and evaluating performance

The Investment Committee shall advice the Board of Trustees with regard to the organisation investment process and the development of the Investment Policies. Its specific responsibility is to advise the Board on the accepted level of return within specified risk parameters for all investment proposals received by Management. The Committee shall also provide advice, to enable the Board ensure that assets are invested in areas consistent with the Trust’s investment objectives.

In general, the Investment Committee shall: Conduct periodic and regulars review of the Investment Policy Statement; advise the Board and Management on the asset allocation policy, evaluate investment performance and report on its findings to the Board, advice on extraordinary investment intentions.

The organisation and day-to-day management of the investment process is delegated to Management. The Investment Department shall undertake all tasks relating to operationalising the Trust’s investments and shall: advise management in selecting among available options for investing funds; Maintain records on all investments, while developing appropriate statistics to be used for reporting; Conduct studies and carrying out preliminary reviews of investment options; and Supervise, coordinate and monitor of the Fund’s active investments.

The Board shall address issues of portfolio management with a disciplined approach. This approach will ensure that the investment objectives of the Trust are met without undue exposure of the Trust’s assets to risk. The strategy builds on a careful study of the characteristics of different assets in the Sierra Leone economy. The objective is to achieve enhanced returns at a controlled level of risk, relative to the long-run global benchmark of the fund.  For the investment process, the Board believes that the most important element affecting future portfolio performance is the asset mix. Despite “information inefficiency” in domestic markets and high transactions costs, the Trust shall endeavour to contribute to the development of a sound capital market. Underpinning the investment process is a commitment to apply sound economic theory and standard valuation method. The Board shall also ensure cost-effective implementation of investment managements.

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