Sierra Leone Pension Fund Invests in Mall as Yields Tumble

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Sierra Leone’s state-owned pension fund, which oversees the equivalent of $184 million, is investing in property developments to boost returns as it shuns Treasury bills after yields fell to record lows.

“There was a time we used to invest heavily” in Treasury bills,’’ said Alpha Keita, acting head of the treasury management unit of the National Social Security and Insurance Trust. “But for now we don’t have much.”

With a policy of targeting returns equal to inflation, which was 7.6 percent in February, plus 200 basis points, borrowing costs on the 91-, and 182-day securities fell out of that range, Keita said in an April 13 interview in the capital, Freetown. The retirement-fund manager invested in a shopping mall being built in the city and hotels including Carlson Rezidor Hotel Group’s Radisson Blu, he said.

Borrowing costs in Sierra Leone plummeted as the government reduced its borrowing from the local market in a bid to drive down yields that reached 27 percent in 2011. The $4.1 billion economy is projected to contract almost 13 percent this year, according to the International Monetary Fund, as the country struggles to end the world’s worst outbreak of Ebola that shut businesses, dried up foreign investment and killed 3,511 Sierra Leoneans.

The pension fund, known as Nassit, has bought 20 billion leones ($4.6 million) of Treasury bills this year, Keita said. That’s compared with about 20 billion leones purchased in the same period of 2014 and 40 billion leones a year earlier. As of December, the agency had an investment portfolio worth 800 billion leones, including funds in hotels and housing. When Nassit does buy government debt, it opts for short maturities, he said.

Liquidity Appetite

“Looking at the pending projects that need huge capital injection we are forced to move our strategy from one year to 91 days,” Keita said. “We have this huge appetite for liquidity.”

Yields on 91-day securities were 2.96 percent at a sale on April 16. In 2014 they dropped as low as 0.84 percent, according to central bank data compiled by Bloomberg. Last week, 182-day notes were auctioned at 3.99 percent and 364-day debt at 6.91 percent. The country’s currency was little changed at 4,325 leones per dollar by 3:20 p.m. in Freetown, marking a 2015 loss of 3.2 percent.

Nassit would be interested in investing in companies listed on the Sierra Leone Stock Exchange if it grows beyond the lone issue currently listed, a stake the government sold in Rokel Commercial Bank Ltd. three years ago, according to Keita.

State-owned enterprises that the government plans to sell to private investors should be traded on the bourse, said Daniel Serry, general manager of Freetown-based brokerage First Discount House.

Bond Sale

The Bank of Sierra Leone informed First Discount it will sell 5 billion leones of two-year bonds to the public on April 30 and more on May 28, Serry said. Sayoh Kamara, a spokesman at the Finance Ministry, said officials weren’t available to comment because Finance Minister Kaifala Marah and his department heads were in Washington for the World Bank and IMF spring meetings.

The two-year debt sale was planned for last year and scrapped as the Ebola outbreak cut economic growth, the Finance Ministry said in August. In November, Marah said the government would raise 106 billion leones in 2015 through selling the debt for a project to bring electricity to rural areas.

Nassit, which holds 40 billion leones of two-year notes at a 13 percent coupon that was privately placed with it by the central bank, may buy the new debt depending on yields, Keita said.

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