Employees Old Age Benefits Institution (EOBI) has realised a phenomenal profit of Rs 2.41 billion for the year 2004-05 on its actively managed portfolio including Rs 1.938 billion on the equity segment which is up 112 percent from the previous year's Rs 915.21 million.
According to details, EOBI has also realised capital gains of Rs 474 million from active management of its bond portfolio, which if passively managed would not have been possible due to a step rise in interest rates.
EOBI investment portfolio has also risen to Rs 95.7 billion whereas total increase income earned has risen to Rs 14.95 billion, up 26 percent over previous year's income of Rs 11.92 billion.
EOBI investment advisor Farooq A. Awan disclosed that this huge income in profit has been possible because of reform process that is currently underway with full support and guidance of the Ministry of Labour. The key elements of this process are professional management of investments, optimisation of asset allocation with a diversified base and an improved regulatory framework.
In the past, he said, excessive reliance on National Saving Schemes instruments due to their higher returns, had hindered the development of modern asset management practices at EOBI and all other public sector institutional funds. This had bred complacency and lack of professionalism at EOBI. As a result investment management functions suffered and scams like FIB repo deal occurred.
Talking about the fixed income portfolio, he said that during the year, EOBI investment management had shortened the duration of its bond portfolio in anticipation of the rate which policy has paid handsome dividends. On the other hand, equity portfolio capital gains were realised around the market peak levels.
Describing the reforms as an ongoing process, he said that EOBI's investment management has been segregated from the EOBI's core function in order to insulate it from incursion of any kind and in line fiduciary obligations of trustees which lay down that funds are to be solely managed in the interest of beneficiaries ie, pensioners and insured persons.
This would enhance accountability and integrity of investment management process. The investment committee is now headed by an non-executive member of the board, which is in accordance with global best practices and would help in resolution of principal-agent problem in governance.
Preparations are underway to induct more professionals in various disciplines of investment management. Recent reforms have transferred EOBI investment into the best-managed fund amongst all mandatory pension funds schemes in the South Asia including India, he stated.-PR
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