Prescribed assets “nothing to fear”: Retirement fund expert Clive Eggers

In this BizNews Personal Finance podcast, Clive Eggers says concerns about the ANC's plans to harness private retirement fund savings to prop up troubled state entities are, at this stage, a case of much ado about nothing. Eggers chats to Jackie Cameron about prescribed assets, plus how long-term investors can help the government with the transfer of land from white hands to previously disadvantaged hands in an orderly fashion – and he warns that investing offshore has been a very bad idea for many people. – Jackie Cameron.An ANC plan to make it a legal requirement that a portion of retirement investments is ploughed into propping up state entities has provoked a storm of controversy. Some fear that the proposal is tantamount to the government hijacking hard-earned savings and argue that if state entities are run well they will naturally attract capital on the basis of superior returns..Clive Eggers, head of Investment Analytics, at wealth and financial advisory firm GTC reckons it is too early to panic. And, he cautions against making investment decisions based on the possibility that the implementation of prescribed assets plans will erode long-term wealth-building efforts. This is even though we are encouraged to invest with a long-term investment horizon in mind..In this podcast, Eggers explains the concept of prescribed assets, which was an approach used by the apartheid government scraping around for extra funds..___STEADY_PAYWALL___.In a nutshell: prescribed assets, he says, are investments that an investor is legally forced to make due to government regulation within a retirement investment product. A hypothetical example of a prescribed asset would be the compulsory allocation of (say) 10% of an investment portfolio to Government and state-owned enterprises, including bonds, he tells his clients.."Prescribed assets are not a new concept to South Africans. In the 1970s and '80s, the Nationalist government legislated prescribed assets within pension funds, before finally abolishing them in 1989," Eggers outlines..A form of prescribed assets currently exists, in which the government dictates through Regulation 28 of the Pensions Fund Act how assets are allocated, he says.."However, in recent months, prescribed assets have been the subject of much fiery debate, after the ANC tabled an investigation into the introduction of prescribed assets as part of its 2019 election manifesto," says Eggers..Read also: Open letter to Tito: prescribed assets; are you SERIOUS?.The ANC's manifesto stated that it will "investigate the introduction of prescribed assets on financial institutions' funds to mobilise funds within a regulatory framework"..Eggers agrees with President Cyril Ramaphosa that a discussion is needed with the Pension Fund industry to explore investments for development and infrastructure purposes. ."The national dialogue became even more heated recently, with Enoch Godongwana, head of the ANC's economic transformation subcommittee, reportedly stating that the asset management industry is sitting on R6trn under management – and should lend some of this to the state. His argument was that this is a better approach than looking to the IMF or World Bank for a bailout.."While GTC is not in favour of any government dictating which assets an investor has to invest in, it is possible that prescribed assets may not result in a detraction of investor returns," says Eggers. .He points to efficiently managed private and public partnered investments, for example a Futuregrowth investment that facilitates the sensible transfer of property from white owners to the previously disadvantaged. Eggers highlights other investments in the area of environmentally and socially responsible investing as opportunities for individuals to contribute investing where South Africa may need it most..But, he concedes that it is going to be challenging to get people to invest voluntarily on the scale required to cater for government's plans to fix state entities..Eggers says some of the reaction to the concept of prescribed assets is based on misconceptions and is based on the "perceived mismanagement" of the economy over the past few years and this has driven hysteria and panic.."We are experiencing this from our own investors and trustees. We are not in favour of prescribed assets… but we do think the discussion does need to happen… Our view would be a relatively light touch from government, with individuals and investors left to make the majority of decisions.".Eggers cautions that the ANC prescribed assets plan would be "catastrophic" if implemented in its worst form but "could be quite positive" properly executed..South Africans have lost huge sums of money "reacting out of fear" and "moving money offshore", he points out..It's too early to make adjustments to your investment strategy based on perceived fear of something that might not happen, is Eggers' message.

Prescribed assets “nothing to fear”: Retirement fund expert Clive Eggers

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