Has anyone heard of Steve Cochrane? Cochrane was a director of a pension fund in the US. He was the investment director for North Dakota's largest pension funds. He was executive director and chief investment officer of the North Dakota Retirement and Investment Office, which manages $3.2 billion in pension funds and almost $1.6 billion in insurance funds, including a $1.2 billion workers compensation portfolio. He took his life about two weeks ago. But why did the man kill himself? It was a stock-market downturn that sealed his fate. Due to their abundant liquidity, pension funds are an attractive resource for investment ��" particularly in high-yielding assets ��" such as securities, analysts say. But the ups and downs of equity markets make it hard for an investment banker to run a diversified portfolio. In Egypt, the total value of pension funds stand at more than LE400 billion ($72.7 billion), according to the Ministry of Finance. With a work force exceeding 24 million under the umbrella of social solidarity, that amount hikes up monthly as subscriptions increase. The Egyptian Government has embarked on plans to invest the cash of pension funds in securities in a bid to maximise returns, which would benefit retirees as officials claim. "Pension funds are like any other funds that should diversify their portfolios to maximise revenues and minimise risks," Suheir Wagih, an economist at Cairo-based Future Investment Consultants, told the Egyptian Mail in an interview. "Pension assets, according to the law, are basically deposited with the National Investment Bank, which offers an interest of less than five per cent, while commercial banks offer double that percentage. It's a huge gap that needs to be bridged," she said, pointing out that stocks could be the answer. "High inflation rates depreciate the value of these assets. Stocks offer higher returns. Pension funds may yield more gains if they are sufficiently run by experienced investment bankers," she argued. But pension funds are created for a social reason. People after the legal age of retirement tap their life-long savings. "These funds are of economic nature as well. Of course pension funds have a special nature regarding obligations. Investment funds are set up as companies in accordance with the law. Pension funds are created by labour savings, which would be ultimately reimbursed to people after retirement," she explained. "The National Investment Bank has used these funds to finance infrastructure and development projects for many years. The Government can invest up to 25 per cent of pension funds according to the new law," she said, adding that in some other countries this percentage reaches 80 per cent. "The Government has a duty to pay these financial obligations. So it's a matter of both liquidity and risk management," she added. Back to the tragedy of Cochrane who committed suicide after the value of two funds under his management shed 27.3 and 24.4 per cent in 2009. Did he lack experience? The deceased held a master's degree in business administration from the University of Florida and had more than 25 years of experience as an institutional investment analyst. There are around nine million pensioners in Egypt. The declines in local stocks over the past two years have spooked fears of many families that have no other income but their pension. "Why a new law? What's wrong with the old one? I have fears that these funds will go with the wind one day and I wouldn't cash my pension. But my hands are tied as I'm not a governmental official or an MP. I'm just a pensioner," Thomas Ibrahim, a retired teacher, told this newspaper. As the English proverb says, ‘Fools rush in where angels fear to tread', so it's a must that the Government play it safe, or another Cochrane would meet his fate here.
