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Smoothed Bonus Funds – best of both world’s

Smoothed Bonus Funds – best of both world’s

By Melissa Ramsamy-Agapitus
Head of Distribution, Old Mutual Corporate

Over the past two decades migration of post retired investors moving from the traditional known Life Annuities to Living Annuities have been observed. One of the main driving forces has been Investment Choice and a Flexible Income Structure.

What investors give up, in order to have choice, means giving up Guaranteed Income and Investment Risk Protection. Many investors may not want to be exposed to excess market volatility but would still want to have access to real returns over the long term.

Therefore, when markets are doing well, a portion from growth in an investors’ investment is put aside to smooth out future volatility or uncertainty caused by market movements. These portfolios help grow money when the markets are doing well, and manage the risk of lower returns when markets underperform.

Smoothing is a means that is used to turn unstable market returns into smoothed returns, also called bonuses. These are savings vehicles that offer steady growth by smoothing out the ups and downs (volatility) often seen in other similar investments. These are best suited to provide returns in excess of Namibian inflation in the long term. The growth in these assets is then passed on to investors by means of a regular bonus. When markets are doing well, a part of this growth in assets, is put aside to smooth out future ups and downs in investment returns caused by market movements.

One of the biggest risks to any investment is emotional decision making. Research conducted by behavioural finance experts, has shown that a lot of people don’t achieve their investment goals because they make bad choices when they see their investments suddenly drop or rise in value.
To avoid this scenario, a Smoothed Bonus Fund, especially when combined with expert advice, helps to manage this emotion and keep an investor focused on their long-term goals by smoothing out these short term ups and downs.

Smoothed Bonus Funds offer the best of both worlds, by giving steady long-term growth while minimising bumps along the way. In other words, these funds help an investor grow their money when the markets are doing well, and manage the risk of lower returns when markets do badly.
In order to achieve the best from Smoothed Bonus Funds, the following need to be taken into consideration:
1. Smoothing – when markets are performing well, a portion of the returns made from the growth assets is put aside so that it can be used to provide investors with a higher bonus, than what they would have received when markets are performing poorly. With Smoothed Bonus Funds, investors are able to smooth out future ups and downs in the returns earned by the fund.

2. Guarantees – the investor can lock in some or all of the growth in their investment by means of guarantees. These guarantees cover a series of defined benefit events such as retirement, death, disability and other pre-specified points in time. Upon the occurrence of any of these events, an investor will not lose the percentage of growth they choose to lock in.

It is critical to get sound advice from a leading financial institution therefore, services and guidance are provided through Old Mutual.

About The Author

Guest Contributor

A Guest Contributor is any of a number of experts who contribute articles and columns under their own respective names. They are regarded as authorities in their disciplines, and their work is usually published with limited editing only. They may also contribute to other publications. - Ed.

Following reverse listing, public can now acquire shareholding in Paratus Namibia


20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.