NSSF Uganda has acquired 2.44% stake in Equity Group from Helios EB in a bid to continue providing a high return to members.
The transaction which is valued at UGX145Billion was approved by the Capital Markets Authority of Uganda, Capital Markets Authority of Kenya, and has been undertaken pursuant to the Capital Markets Act.
The Fund’s MD Mr, Richard Byarugaba throws more light on the investment decision.
Why did NSSF choose to invest Outside Uganda
The legible opportunities within the country are not enough to absorb NSSF’s investment’s potential. NSSF has invested heavily within the Ugandan Economy and currently holds 20% of traded securities listed on Uganda’s Securities Exchange.
Investing in other Equities markets within the East African region therefore provides an opportunity for diversification of the Fund’s investments but does not imply that the Fund will lose sight of any upcoming lucrative investment opportunities within Uganda.
Why did NSSF choose to invest in Equity Group?
NSSF’s investment in Equity Group is in Line with the Fund’s strategic Plan and will enable the Fund improve its portfolio mix. Currently The Fund’s investment portfolio comprises of 10% Equities, 9% real estate and 81% fixed income, our overall aim is to increase our investments composition in Equities which on average provide a higher return in comparison to the other investments held fixed assets and real estate.
We also specifically selected Equity Group, because Equity Group is a fast growing financial institution within Africa and has registered exceptional performance over time. Since 2000 the Group’s pretax profit has grown at an annual average of 65%. The Group also has a proven track record of value creation for its investors and efficiency in utilization of its assets registering Returns on Equity (ROE) and Return on Assets (ROA) of 27.6% and 4.8% respectively.
Equity Group is also the 2nd Largest Bank in East Africa, with a good track record of successfully establishing subsidiaries across East, west and Central Africa.
We are also impressed by the Groups adherence to good corporate governance practices that have earned it recognition and several awards including Best Bank in East Africa during the ‘2014 Think Business Banking Awards’ and recognition as one of Kenya’s Top Tax Payers.
How much money has the Fund invested?
The Fund has invested UGX 145 billion.
What is the projected return on this investment?
We cannot speculate the actual figures, but we believe this is a good investment for a long term investor like NSSF. This acquisition is in line with our aggressive yet, prudent investment approach that guarantees a competitive return to our members.
Why the movement into equities?
As explained above, currently, 81% of our investments are in Fixed Income. Fixed income is safe, but if we want to give a more competitive return to our members, we must diversify more into equities, especially regional equities. Investment opportunities in the region such as Equity Group offer us an opportunity for diversification in order to achieve a desirable portfolio mix.
- Has the investment been approved by all relevant authorities?
Due procedure was followed in line with our Investment policy and yes we hereby confirm that the investment was approved by the Fund’s Management Investment Committee, the NSSF Board of Directors in consultation with the Minister of Finance, Planning and Economic Development. We also obtained legal advice from the Office of the Solicitor General.
- What measures are in place to protect the Fund’s investment in the long term?
This is a listed investment/security which provides for a straightforward exit: the stock is one of the most liquid stocks in East Africa. The company is cross listed in Uganda and Rwanda, and has adopted best practice with regard to Corporate Governance standards.
