KARACHI, July 9: The Employees Old Age Benefits Institution (EOBI) realized a phenomenal profit of Rs2.41 billion on its actively managed portfolios and other investments in 2004-05. A fabulous profit of Rs1.938 billion on the equities, which rose by 112 per cent from the previous year, was also achieved.

The Institution has also realized capital gains of Rs474 million from active management of its bond portfolio which if passively managed would not have been possible due to a steep rise in interest rates, official sources said.

The EOBI’s total investment portfolio also recorded a tremendous growth of Rs14.95 billion or 26 per cent up over previous year’s income of Rs11.92 billion and stood at Rs95.7 billion.

Farooq A Awan, investment advisor to EOBI talking to Dawn attributed the profits to evolutionary reform process that is currently underway with full support and guidance of the Ministry of Labour.

The key elements of the process, he said, are professional management of investments, optimization of asset allocation with a diversified base and an improved regulatory framework.

In the past, Mr Awan said, excessive reliance on National Saving Scheme instruments, because of 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.

Referring to 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 rises which had paid handsome dividends. On the other hand, equity portfolio capital gains were realized around the market peak levels.

Describing the reforms as an ongoing process, he said that EOBI’s investment management had been segregated from the institution’s core function in order to insulate it from incursions of any kind and in line with fiduciary obligations of trustees which laid down that funds are to be solely managed in the interest of beneficiaries i.e. pensioners and insured persons.

As a result of this it enhanced accountability and integrity of investment management process. The investment committee is now headed by a non-executive member of the board which is in accordance with global best practices and would help in resolution of principal agent problems in governance.

Preparations are underway to induct more professionals in various disciplines of investment management. Recent reforms have transformed EOBI investment into best managed fund amongst all mandatory pension funds schemes in the South Asia, including India, he added.