Excessive amounts of money at the Guardian Fund, a national investment vehicle comprising unclaimed inheritance, is being invested at an inadequate rate of return of as low as 5.5% by some fund managers.
This is raising questions about the administration of the fund, which industry insiders say should be producing minimum returns of at least 8% in the short to medium-term, and up to 12% over the long-term.
“A thumb suck should always be inflation plus 2% over the long-term. These returns are at 5.5% against annual inflation of 6.3%. You could have gotten at least 7.65% by just parking it in a money market account,” commented one fund manager who prefers anonymity. Another fund manager pointed out: “It depends on how long the money was invested”.
The fund is worth N$2.4 billion, including capital and interest earned.
There are strong internal allegations that banks and unlisted investment entities, responsible for investing money on behalf of the Guardian Fund, are raking in ridiculous profits while only providing crumbs which end up benefiting the fund and by extension, the real beneficiaries.
While the fund made a significant amount of money in the last financial year, staff at the institution feel the administrators who invest the fund’s money make enormous profits for themselves, while this does not reflect in the returns the fund enjoys.
Based on New Era’s analysis, at least N$1.9 billion of the fund’s money is held by insurance giant Sanlam.
The in-house breakdown further reveals varying rates of return from different fund managers, with Capricorn Wealth Managers coming out on top with 10.72%, Cirrus Securities at 8.58%, Simonis Storm at 8.2% and Sanlam coming in at a mere 5.52%.
At the end of April 2022, Sanlam held N$1.87 billion on behalf of the Guardian Fund. In essence, they managed to grow the fund by around N$100 million, which is shocking, according to economist Mally Likukela.
“That’s the worst investment ever. You can’t make N$100 million from N$1.8 billion. You must change your strategy,” the perplexed economist said yesterday.
Internal analysis further shows that, at Capricorn Wealth Managers’ current 10.72%, it could have made N$99.8 million more on the N$1.87 billion Sanlam held last year, during the same period.
On his part, Popular Democratic Movement leader McHenry Venaani said: “It’s a sluggish result, and obviously if 30% of that fund can be invested in properties locally, the return on investment will be more. Compare the Sanlam performance to GIPF, and you will have your answer.”
The silence from Sanlam has been deafening, as detailed questions sent to the institution more than two weeks ago remain unanswered.
They have refused to disclose the minimum return on investment required, or even say how much it charges in administrative fees for handling funds on behalf of the Guardian Fund.
Meanwhile, deputy Bank of Namibia governor Ebson Uanguta said it is difficult to rate performance in the absence of seeing the investment agreement between Sanlam and the Guardian Fund.
“In judging performance, the benchmark and investment horizons are the key considerations. I have not seen the IPS for this fund, but judging from the purpose of the fund being ‘to protect the monies of persons’, I am assuming that this fund has a low risk tolerance, and that the benchmark has been set accordingly. In other words, they should not lose capital at all. Thus, low risk will be taken and thus low return,” he stated.
Uanguta continued: “In judging the performance of Sanlam specifically, we would need to see how they fared versus that benchmark that was agreed upon. Further, we would also need to understand how they have fared over a longer period of time to assess their capabilities.”
Another economist, Rally for Democracy and Progress leader Mike Kavekotora, expressed satisfaction with Sanlam’s performance, under the current economic climate.
“I think 5% is a fair return in that turbulent environment and the economic downturn that has been experienced,” he stated.
These concerns have been raised amid internal fears that middlemen institutions investing inheritance monies are raking in millions at the Guardian Fund’s expense.
Official records show N$131 million was generated on its behalf in the last financial year.
The fund consists of money belonging to minor children bequeathed to them without a will by deceased guardians, or money that was not specified in any will or testament.
Although the justice ministry did not entirely respond to the allegation, it provided detailed figures showing how much interest the fund generated in the past year, and from who.
“Previously, the only company in Namibia that offered an administrative platform for unit trusts was Sanlam through the SP2 platform, and the bulk of the money was invested in unit trusts on their platform,” the ministry’s spokesperson Edmund Khoaseb said in response to detailed questions.
At the moment, the Guardian Fund is administered by the Master of the High Court.
Moreover, at least N$93 million remains unclaimed from the Guardian Fund by beneficiaries, details further revealed.
There have been calls for the fund to pay over these unclaimed monies kept for more than 30 years to the ministry of finance.
“This amount is not due for payment to the ministry of finance yet, as the 30-year period has not lapsed in terms of the legislation on deceased estates,” Khoaseb stated.
The fund has about 52 000 beneficiaries.
In the past, there were plans spearheaded by then justice minister Sacky Shanghala to have greater control over the Guardian Fund.
He wanted to have oversight over inheritance money under private care, it was reported back in 2019. Shanghala’s plans, albeit appearing bona fide then, were met with a pinch of salt by industry players in the legal and financial sectors.
The Namibian reported then that people administering inheritance funds on behalf of minors were not consulted when changes were made to the Administration of Estates Act.
Almost four years later, issues around oversight over the fund still linger.
As things stand, the Act does not provide for a proper, transparent investment framework as per the King Code on corporate governance.
“Therefore, an amendment to the legislation was necessary. Section 87 of the Administration of Estates Act 66 of 1965 (as amended - 2018) provides that the Minister of Justice, after consultation with the Master and with the concurrence of the minister responsible for finance, may determine the governance framework for investment of moneys, which are not required for immediate use,” Khoaseb continued.
To close some of the gaps, the establishment of an investment committee has been mooted.
This committee will be responsible for the investment of monies, policies and guidelines governing the fund’s investment portfolio, and monitor compliance with those policies and the performance of the fund.
He added: “In the meantime, the ministry of justice exercises oversight of the fund, and annual balance-sheets are compiled and submitted to the auditor general (AG). The internal audit department is also tasked with audits on the fund.”
There were also calls for a probe into the fund’s N$35 million investment through Namibia Equity Brokers into Faanbergh Properties.
To this, Khoaseb said: “Faanbergh Properties were placed into liquidation. The liquidation was not finalised yet. The funds were invested through a brokerage namely Cirrus, previously known as Namibia Equity Brokers. The insolvency inquiry is ongoing.”
Over the years, there have been calls for the auditor general to zero in on the Guardian Fund’s financial statements.
The last audit report issued by the AG was for the 2009/2010 financial year.
The Master of the High Court’s office migrated to a new financial system in 2018.
The previous years’ reconciliation was done on Pastel software, and reconciliations done on that software posed a challenge when the migration took place, the spokesperson noted.
“The fund is ready for auditing,” he added.