Investors in ECOBANK EDC losses value due to economic crisis

November 9th, 2022 at 05:21 am

Investors in ECOBANK EDC losses value due to economic crisis

Over the last few months, Ghana’s economy experienced high inflation which has been on a sustained upward trajectory. The rising inflation and the subsequent increases in Bank of Ghana’s policy rate have resulted in a rising interest rate environment. The local currency (Ghana Cedi) has also suffered a very high level of depreciation.

This has resulted in the value of existing bonds declining. This means the value of bonds (Government and Non-Government) held in the EDC Ghana Fixed Income Fund (and other Collective Investment Schemes) have declined. However, this decline is realized only when the bonds and other assets are sold. On the contrary, the full value on the bonds is realized when they are held till maturity. Indeed, the more our unitholders request to exit the fund (by way of redemptions), the more we have to sell some of these bonds to be able to process the redemptions. These sales result in losses accruing to the fund.

To ensure protection to investors and comply with all regulatory directives and financial valuation standards, we wish to inform all unitholders that the valuation method for units held in our funds have been updated to the fair value valuation. This means that unitholders who wish to exit their investments will trigger their redemptions at the prices at which these bonds are presently worth on the market which may currently result in losses in view of the current declining bond prices.

However, investors that choose to remain in the fund until Ghana’s macroeconomic heath and bond prices improve are not likely to realise these losses. We wish to encourage all unitholders to remain in the fund in order to preserve value of the fund as new Inflows and maturities are invested at current interest rates that would help to improve the returns on the fund. Further, we encourage unitholders to remain in the fund in order not to incur the market losses on their respective holdings and rather consider redemptions when the market recovers.

Kindly note that in view of the change in valuation method to the fair value approach, any Unitholder who decides to redeem his /her investments would have to do so at the current values of the bonds and other assets of the fund which may result in losses for that unitholder. This is because, all redemptions would be done using the current market values of the bonds and assets of the fund. These losses may impact the principal of the unitholder depending on how long they have been in the fund and prevailing bond prices.

It is our hope that government’s ongoing engagement with the international Monetary Fund (IMF) will result in an eventual recovery.

We encourage our cherished unitholders to remain calm and not take rushed decisions amid all these economic challenges. We wish to assure you that EDC Investments Ltd will continue to be prudent in the management of your funds as we have done in over sixteen years.

For further clarification, kindly contact us via email on edc-clientservice@ecobank.com

Yours Faithfully,
EDC investments Limited.

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