HFC to diversify portfolio

Accra, July 12, GNA - The management of HFC Investment Services Limited says it is realigning the portfolio structure of its investment in order to hedge against any future bearish occurrences on the stock market and their negative effects on shareholder value.

Mr Joseph Nketsiah, General Manager, HFC Investment Services, said part of the realigning strategy was to sell non-performing equities in order to invest the proceeds in other higher yielding instruments like bonds, preference shares and commercial paper.

He was speaking on Wednesday at separate Annual General Meetings of the Services' three-investment instruments - HFC Equity Fund, HFC Unit Trust and HFC Real Estate Investment Trust (REIT).

On the performance of the Unit Trust as at December 2005, Mr Nketsiah said the poor performance of equities on the Accra bourse adversely affected the performance of the portfolio.

The stock market turned a year-end performance of negative 29.85 per cent while interest rates were also on a continuous decline reaching 11.53 per cent by the close of 2005 thus affecting the investment income of the fund.

The fund yielded three per cent last year as compared to 27 per cent made in 2004, the lowest gain in the company's history since its inception in 1991.

Mr Nketsiah said as the result of the low performance of the Fund, new and additional investments into the Fund slowed and some investors withdrew part or all of their investments.

This led to a decline in the value of the Fund from 194.4 billion cedis in 2004 to 158.14 billion cedis as at December last year. Mr Nketsiah expressed the hope that with the renewed good performance of the stock market and the listing of new equities would increase investor confidence and reverse the downturn of last year. Like the HFC Unit Trust, the HFC REIT also suffered a negative performance last year, yielding a negative return of 3.88 per cent, down from 10 per cent recorded in 2004.

Similarly, the Fund value decreased to 13.2 billion as against 19.2 billion in 2004.

Mr Nketsiah attributed the poor performance to a legal tussle over land for REIT Top Housing Estates and the general slow down in the property market resulting in low margins on the sale of houses. He said the Fund completed 49 houses at Baatson, near Tema, out of which 41 were sold. The remaining eight will be sold this year. There are also plans to develop additional 15 houses for sale and to redevelop a rental unit in Kumasi into four duplex houses. On the overall performance of the Equity Fund, Mr Nketsiah said the Fund outperformed the GSE All-Share Index through prudent asset allocation strategies adopted by the Fund Manager.

The Fund's end of year yield of negative 21.25 per cent was much better than the negative 29.89 per cent posted by the stock market for the same period.

Net asset value of the Fund decreased from 9.35 billion at the beginning of the year to 6.9 billion cedis, a reduction of 26.2 per cent.

Mr Nketsiah said the Management would continue to provide excellent customer service and prudent portfolio management to ensure steady and long-term growth in investment.