In the new knowledge economy, Intellectual property (IP) is an important strategic asset for many companies, as it is the core determinant of competitive advantage of a company, which in turn is a key factor in creating business wealth. Intellectual property can be an important strategic asset for Pension Funds and be a key factor in creating business wealth. Pension Funds are required at law to have a written Investment Policy Statement (IPS), covering at a minimum strategic and tactical asset allocation, performance objectives, trade execution, the use of external managers and establishing mechanisms for monitoring the costs of their services. This duty supports the adoption of a responsible investment approach to deploying capital into markets that will earn adequate risk adjustment returns suitable for the fund’s specific member profile, liquidity needs and liabilities.


In Zimbabwe traditional pension fund investments have continued to suffer due to the economic downturn and IP may provide another answer to the real need of hedging against currency and economic risk. The impact of COVID-19 (coronavirus) has been also been swift and severe on eroding Pension Fund Investments. This has heightened the need for Trustees of Pension funds and Pension Fund Administrators to review and reconsider investments. In Zimbabwe, pension funds are required at law to invest at least 20 percent of their investment portfolio in prescribed assets. In a normal environment, prescribed assets, such as stocks, bonds and other types of Government paper should generate significant returns. However, inflationary pressures have affected the level of returns investors can generate from such assets. As a result, Government, together with IPEC has moved to approve a number of alternative investments as prescribed assets to enhance the investment environment for pension funds. Pension Funds have thus been challenged to come up with alternative investments for prescribed asset consideration. Pension Funds can own intangible assets from innovative SME’s, Universities and Research Institutions or even their own existing IP.


Intellectual property generally refers to creations of the human mind, which among others include patents, trademarks, copyright and related rights, industrial designs and geographical indications. In today’s knowledge economy these intellectual products encourage innovation and creativity which in turn spurs economic development and prosperity. The significance of IP as a wealth creator is underscored in WIPO’s report by the fact that, in the year 2014, IP contributed US$5.9 trillion to the world’s economy for that year. This is twice as much as buildings, machinery and more recognizable forms of capital. The relative value of intangibles combined with digital trading is evident from the fact that Alibaba, the world’s largest retailer, owns no stores; Uber, the world’s largest “taxi business”, owns no taxis; and iTunes only supplies digital recordings of music.[1] According to a report by the UK IP Office, in 2011 the UK market sector invested some GBP137.5 billion in intangible assets and IP rights, with just GBP89.8 billion invested in tangibles. The gap in investments in tangibles and intangibles continues to widen.^[2]


While Globally Intellectual Property is now the most valuable asset class, establishing IP value and exploiting the economic potential of IP assets remains much of a mystery to businesses, financiers and investors. While there may be a lot of potential for investment in IP, the question is whether the Zimbabwean Pension Fund Industry is equipped enough to respond to this potential. Before huge investments in IP, certain caution exercise needs to be undertaken. First the issue of IP knowledge has to be addressed as much awareness has to be spread regarding IP. Secondly, processes involving IP valuation to accord protection, would mean a mammoth task with expertise and suitable skills required by the industry. Another challenge relates to the volatility of IP as intangible property. The rapid change in exposures and technology can render IP value obsolete making it difficult to measure its loss. Handling all kinds of challenges is not the sole responsibility of only a few; but should involve all players in the financial services industry.  While these challenges are acknowledged, they should not hinder the development of investments in IP.


The Insurance and Pensions Commission as regulator of the Pensions industry  ^[3] has a wide mandate emanating from several statutory provisions on pension fund investments.IPEC  has issued various guidance documents to help trustees,  key aspects of which include that: —trustees should review and manage specific risks that may now exist within their portfolios—trustees should review any previously agreed investment and risk management decisions to be implemented in the future to ensure they remain and —trustees should review their investment governance structures.[4]


Pension Funds are required at law to invest at least 20 percent of their investment portfolio in prescribed assets. Prescribed ratio measures the percentage of pre-arranged retirement fund assets that, legally, would have to be allocated to certain government-approved instruments. Prescribed assets traditionally are bonds or securities issued by the Government, local Government, quasi-Government organization’s or any other bond that may be accorded the prescribed asset status. In a normal environment, prescribed assets, such as stocks, bonds and other types of Government paper should generate significant returns. However, inflationary environment has increased the risks associated prescribed assets investments, particularly in as far as they are performing below inflation. As a result, Government, with IPEC has moved to approve a number of private equity investments as prescribed assets to enhance the investment environment for pension funds. IPEC has urged the pensions industry to be innovative and come up with value preserving instruments that can be considered for prescribed asset status.


IPEC has thus challenged Pension Funds to come up with alternative investments in prescribed assets to ensure return on investments and regulatory compliance. As such new prescribed assets such as development of specialist hospitals and solar parks have been approved. The current vision of the Government is to drive the knowledge economy through innovation and investments in IP. Accordingly, Pension Funds have a justification for considerable investments in IP and prescribed asset approval can be sought form IPEC on the basis that IP investments are in line with the objectives and interests of government.


Historically, the dependence of Zimbabwe’s pension industry on the equities and the property markets has resulted in financial losses at every downturn in the economy. This may be the opportune time to start a conversation surrounding the increased investment in IP assets. The context in which IP currently operates is very different from the one in which IP rights were conceived. Imagine a pension fund investing in a patented invention which can bring billions in return over the years? IP may provide another answer to the real need of hedging against currency and economic risk and should be discussed extensively within the pensions industry. Investments in innovative SMEs or strategic partnerships with University Innovation hubs would be a starting point.It is, therefore, imperative that pension funds inject more funds into Intellectual property assets and ensure they move towards compliance and in projects of national importance which can be awarded prescribed asset status. This would be ideal in view of the long-term nature of the liabilities of pension funds.

[1] Intellectual property, finance and economic development by John P Ogier, WIPO

February 2016.

[2] Intellectual property, finance and economic development by John P Ogier, WIPO

February 2016

[3] Chapter 24:21

[4] Section 5(a) of the Insurance Act^[4] states that IPEC must protect the rights and benefits of policy holders and policy beneficiaries; Section 5(b) denotes that IPEC is responsible for the alignment of the activities of those in the insurance business with the economic, social and financial objectives and interests of the State. (my emphasis).