Fund managers will soon have a wider pool of assets to pick from when investing pension savings, following the adoption of amendments to pension regulations by Parliament on July 23.
The regulations still have to be approved by the Senate, but industry representatives are already cheering the initial passage in the Lower House.
Sanya Goffe, president of the Pension Industry Association of Jamaica, PIAJ, called it a welcome development, but cautioned that managers may need training on how to pick the right investments.
Goffe said that managers should take advantage of private equity training for pension trustees and managers, to ensure that their investment picks align with the fund’s risk and return objectives, and stay within prescribed limits for different asset classes.
The amendments broaden the range of permissible assets in which pension plans can invest to include bonds, that is, unsecured debt, issued by companies that have an investment-grade rating from a recognised rating agency, as well as bonds issued by companies listed on the Jamaica Stock Exchange.
In a related release, the Ministry of Finance said the amendments correct the anomaly where pension plans could invest in equities of listed companies but not unsecured debt issued by the same companies “even though these have a senior claim on the assets of the company compared to the company’s equity securities”.
Pension funds will also now be able to invest up to five per cent of their portfolios in equity or debt of private companies, established under the laws of Jamaica. This will allow pension funds to make private equity and venture capital investments for the first time, the finance ministry said.
Goffe told the Financial Gleaner that the amendments are expected to unlock billions of capital.
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