Shallow markets, limited alternatives hindering pension fund growth
By Joshua Worlasi AMLANU
Shallow capital markets and a persistent lack of investable alternatives puts the country’s pension industry at risk of systemic fragility, Afriyie Oware, Chief Executive Officer-Axis Pension Trust, has said.
The pension sector’s overreliance on government securities has remained unchanged despite multiple regulatory interventions aimed at rebalancing investment portfolios. As of 2023, about 83 percent of pension assets were still allocated to government bond – slightly down from a peak of 84 percent during the post-financial clean-up era.
Speaking at the 2025 Pension Investment Strategy Conference, Mr. Oware said weak market structures are undermining portfolio diversification efforts and leaving pension funds overexposed to government debt.
This trend reflects a deeper problem, Mr. Oware warned, stating: “It is not the role of government to create investment assets for the pension industry”.
The Chief Executive Officer traced the pension system’s investment trajectory across three phases: a conservative launch, risk aversion post-2017 and the current era of structural paralysis. Despite revisions to investment guidelines and the introduction of lifecycle funds, trustees have struggled to diversify holdings – largely because of limited viable options in the capital market.
“The root of our collective failure lies in assuming that our financial markets are mature enough to support true diversification,” Mr. Oware said. He described trustees’ heavy allocation to sovereign instruments as a rational response to an irrational system that offers few credible alternatives.
Ghana’s equity market remains underdeveloped, with pension allocations to listed stocks languishing at just 3 percent. The corporate bond market fares even worse, accounting for a mere 1.5 percent of total bond activity.
Weak corporate governance, high non-performing loans exceeding 24 percent and the collapse of key state enterprises have all eroded investor confidence; making it harder for pension funds to shift capital into the private sector.
“There is a structural mismatch between available capital and bankable opportunities,” Mr. Oware said. “You can’t diversify if there’s nowhere to go.”
Mr. Oware proposed six reform pillars, ranging from deepening the equity and corporate bond markets to revitalising municipal finance and unlocking real estate investment through land use reforms.
He also called for the formalisation of Ghana’s fragmented money markets, pointing to need of an organised platform for negotiable fixed deposits and commercial paper.
“Without these structural changes, pension funds will continue to ‘invest in the parasite’ instead of the host,” Mr. Oware said, using a metaphor to critique the current overexposure to public debt at the expense of real sector investment.
He further advocated a reimagining of state capitalism, encouraging government to deploy its borrowing power in commercially viable public-private partnerships that attract pension financing – citing the Twifo Oil Palm Plantation project as a success story.
Political commitment, he added, is essential. While pledges of fiscal discipline from President John Dramani Mahama and macroeconomic restraint from the Bank of Ghana are welcome, Mr. Oware emphasised that market reform must be trustee-led.
“Our decisions will either perpetuate economic vulnerability or build long-term prosperity,” he said.
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