Q: Thank you for joining us, Banomile. You have been with Old Mutual Eswatini for 14 years, with seven of those years dedicated to working in the retirement space. What have you observed as a major challenge for people retiring?
A: As OM Eswatini, we have observed that one of the biggest challenges is the lack of adequate retirement savings. Many people underestimate how much they will need to maintain their lifestyle after retirement. Additionally, a significant number of employees start saving too late, which means they have less time for their investments to grow. We also find that many workers cash out their retirement savings when they change jobs instead of preserving them, which significantly reduces their long-term financial security.
Another challenge is that people often invest in conservative instruments that offer low returns, barely keeping up with inflation. Without exposure to growth assets, their retirement funds may not be sufficient to sustain them through retirement. As a result, the AGP was introduced to address these challenges by providing inflation-beating returns over the long-term period.
Q: Can you unpack OM Eswatini’s Absolute Growth Portfolio? What exactly is it, and how does it work?
A: The Absolute Growth Portfolio, or AGP, is a cutting-edge retirement investment solution that combines long-term growth with protection from market volatility. It uses enhanced smoothing technology to ensure steady returns, even during periods of market instability.
The AGP is built on a diversified investment strategy, with exposure to both local and offshore instruments. The asset classes provide investors with exposure to varying industries, and sectors as well as other growing and matured economic markets. These growth assets are designed to deliver real returns above inflation, which is crucial for retirement savings.
Additionally, the AGP offers a guarantee on the capital accrued over the investment period, to be precise we guarantee eighty percent (80%) which provides participating funds peace of mind that in the eventuality of a financial meltdown, participating employees would not lose their entire fund credit. We are recovering from a global pandemic and markets within that period experienced a serious decline other even tanking to low levels of negative returns. The guarantee aspect cushions the fund in such eventualities to never lose anything in excess of twenty percent of the total fund credit.
Q: Is this investment portfolio open to individuals or institutions?
A: The AGP is primarily designed for institutional investors, specifically retirement funds schemes. It allows employers to offer their employees a structured, secure, and high-growth investment vehicle that will aim to deliver inflation beating returns which is critical for the working force as they work towards preparedness for retirement.
However, individuals can also benefit from the AGP through their employer-sponsored retirement plans. We encourage businesses and organizations to integrate this portfolio into their employee benefits structure, ensuring that workers have access to a sustainable retirement investment option.
Q: What are the primary objectives of the AGP?
A: The primary objective of the AGP is to provide long-term growth for retirement funds. In Eswatini, we’ve observed that many people are not retirement-ready, often because their investments are in conservative instruments that offer returns close to inflation.
The AGP aims to deliver inflation-beating returns by investing in high-performing assets, such as equities. This is particularly important for younger investors, as they have the advantage of time to allow these assets to grow significantly. For older investors, the AGP includes conservative instruments to safeguard their capital while still providing growth.
Q: How does the AGP address market volatility while ensuring financial stability and growth for investors?
A: Market volatility is an inherent risk in any growth-oriented investment. Factors such as political changes, economic shifts, and global financial events can cause fluctuations in asset values. The AGP’s smoothing mechanism helps mitigate these fluctuations by through diversification in the asset class as well as exposure to different markets.
For example, during the COVID-19 pandemic, many growth instruments experienced negative returns due to global market stagnation. However, the AGP’s smoothing feature cushioned its investors from the worst of these effects, this smoothing feature provides a safety net where investors enjoyed the positive bonus declarations which were accrued in what we call a BSR (Bonus Smoothing Reserve) which preserves a portion of the market returns. The BSR provides layer of security to ensure positive growth even market performance is dismal and we have seen this materialize during and post the covid period.
Q: How have you seen the AGP’s smoothing mechanism play in managing market volatility?
A: The smoothing mechanism is one of the unique features in this portfolio. It works as a buffer to the daily market movements which are influences by various factors. And we have seen it cushion investors who were retiring, changing jobs and some who passed away during the downturn of markets where the BSR continued to make positive bonus declarations meaning investors were not impacted by the market fluctuations.
This means that investors don’t experience the full brunt of market volatility. Instead, they enjoy smoothed returns, which are particularly important for those both nearing retirement as well as the younger demographic.
Q: How does OM Eswatini ensure transparency when it comes to the AGP performance?
A: The AGP has a mandate that addresses retirement fund needs and its construct provides clear, easy to understand investment exposure. We share the portfolios performance quarterly in our social media platforms as well as for customers invested in the vehicle also enjoy sessions wherein, we unpack the quarterly performance and we share the future outlook and views on investment opportunities.
These engagements we believe are crucial for any retirement fund as it provides members with the required knowledge and appreciation of where their retirement savings are invested as we also unpack the market landscape which informs where opportunities lie to ensure the investment vehicle provides the desired growth.
Q: What sets the AGP apart from other retirement investment options in Eswatini?
A: The Old Mutual AGP uses enhanced smoothing technology to grow retirement savings while protecting investors from the risk of volatile markets. This means it provides the best of two worlds, exposure to growth assets and smoothing to manage risk. Most investment vehicles in our market will be either in pure growth instruments and or conservative instruments.
Q: Retirement planning is generally often overlooked in Eswatini. How does Old Mutual address this challenge?
A: Education is key. Many people in Eswatini don’t realize how much they need to save to maintain their lifestyle post their working life. We are passionate in driving this awareness around retirement readiness: as a responsible business we believe in empowering the working community on the importance of having conversations on the importance of saving early towards retirement.
There are numerous engagements we have set in place such as thought leadership forums, training workshops, financial awareness which we run in collaboration with wellness units within businesses. In these we engage intentionally with the working community to have honest, robust conversations on our landscape in relation to retirement readiness but also inculcating a culture of saving as a nation.
Q: What is your message to individuals and businesses regarding retirement investments?
A: Start now. The earlier you begin saving for retirement, the more time your investments have to grow. Be consistent in your contributions and choose an investment vehicle that aligns with your goals.
When it comes to retirement investments, it’s important to focus on growth assets that offer long-term delivery, ideally with a 10-year or longer investment horizon. Define your goals early—whether for personal retirement or employee retirement plans—and choose investments that align with those goals. Stay disciplined and avoid reacting to short-term market changes, as long-term growth is key to securing a comfortable retirement.
For businesses, offering a robust retirement plan is not just a benefit—it’s an investment in your employees’ future. At Old Mutual, we’re here to provide the guidance and solutions you need to make informed decisions.