Joe Tennant, “Head of Middle East Intermediary” by Schroders.
This partnership of around twenty years allows the Mauritian side to be aware of the latest developments on the global financial markets. The latest awareness program for advisors from the Swan group branch in the non-banking sector was held on May 2 and 3 at the Labourdonnais Waterfront.
Never have players in financial markets, where holders of various types of assets seek a return on investment greater than that of banks, been so at their wits’ end. Especially since the Covid-19 pandemic. Result: operating costs on financial markets have skyrocketed, with the decision of central banks caught in the throat by unexpected increases to increase the key rate to mitigate the impact of inflation. The challenge in such a situation has been to seek a high level of return on investment.
Not impossible for Swan Capital Solutions, the illustration of the strategy of the group engaged in insurance since 1855, to diversify its activities. With its six entities in several niches, the entity has positioned itself as an essential provider of financial services with the opportunity to rub shoulders with global market players. However, in these big waters, it must swim against equally tumultuous waves as the Covid-19 pandemic such as artificial intelligence, climate change, the Russia-Ukraine and Israel-Hamas geopolitical conflicts, which risk igniting the rest of the world and their impact on economies. Result: all economic and financial players must navigate an uncertain and volatile environment, where an asset can experience a price variation.
If Swan Capital Solutions has been able to stay afloat, this is due, in large part, to an option taken around twenty years ago with the search for the partner best able to enable it to guarantee a return on investment for its clients. The choice therefore fell on Schroders, an international asset management group of British origin with 6,000 employees in 32 offices in 26 countries in Europe, Asia and the Middle East.
The Chief Executive Officer of the Swan group, Louis Rivalland explains that “Swan Capital Solutions’ posture consists of regularly reviewing its strategy with the main objective of making the necessary adjustments and taking measures to enable the numerous portfolios that we manage to initiate a process of diversification into asset classes. The idea aims to mitigate the effects of risks likely to compromise the return on our clients’ investments to identify avenues with the potential to obtain the expected level of return. This is why our advisors constantly seek feedback from Schroders experts. For us, this is an essential approach if we want to offer investment strategies corresponding to their long-term objectives while taking into account the risks inherent to them. It was in the presence of Rob Scott and Joe Tennant, two representatives from Schroders, who came to coach the financial advisors from Swan Capital Solutions for two days.
Among the themes on the program were: innovative measures in equity allocation; introduction to the investment programs of official institutions in relation to a strategy within the framework of the obligations of a development model with regard to the environment, social and governance; the design of a modeling of the investment yield curve; the sovereign investment funds of States that central banks must make profitable, public investment funds or even the management of pension plans. So many subjects which could not leave the Bank of Mauritius (BoM) indifferent, whose presence of Mardaya Kona Yerukunondu, first deputy governor and director of its board of directors, allowed the audience to have the testimony of an entity responsible for managing the country’s reserves, in an uncertain and volatile environment. He thus spoke of the challenges that the central bank faced.“It is about seeking a high return on investments while the trend is moving towards a reduction in the amount earmarked for investment projects. This, without such an initiative exacerbating the amount of the budget devoted to financing the costs arising from the risks to which the different types of assets in the Central Bank’s reserve portfolio are exposed.”
For the first deputy governor of the BoM, the task of central banks to achieve the objectives of investment projects is much more complex than that of conventional investors. “Central banks have the responsibility to sell foreign currencies to provide sufficient liquidity in the local money market during periods of significant financial stress. A situation which leads to a reduction in the amount of reserves which could have been committed to the execution of investment projects. During the Covid-19 period, the BoM sold no less than USD 4 billion. A situation which has considerably reduced the overall amount of our foreign currency reserves. At the same time, the cost of operating in free financial markets has considerably reinforced the tendency of global central banks to increase their key rates in an attempt to neutralize the effects of inflation.
So what was the performance of the Central Bank in managing its assets intended to bring the expected returns? “The performance of the values of the Bank of Mauritius’ reserve portfolio, underlined Mardaya Kona Yerukunondu, was relatively satisfactory. The decision to opt for the creation of a diversified portfolio of assets resulted in allowing the Bank to rely on multiple sources of return from its investment program.
The latest financial report of the Bank of Mauritius for the financial year which ended June 30, 2023, made public on Tuesday, indicates that the banking sector regulatory body achieved a decrease of 47.8% and an increase of 9 .4% respectively of its cash and its gold deposit, which are among its reserves. Its cash reserves fell from Rs 103.4 billion in 2022 to Rs 54.1 billion in June 2023. This is a drop of Rs 49.3 billion, or 47.7%. On the other hand, its gold reserves show an increase of 6.4%. Their value increased from Rs 32.8 billion in 2022 to Rs 34.9 billion for the corresponding period in 2023, an increase of Rs 2.1 billion.
