BPOPF tweaks investment strategy in search of higher returns
Mbongeni Mguni | Monday September 6, 2021 06:00
The pension fund, which is the country’s largest and the anchor of fund management activities in the local market, recorded its high returns on the back of COVID-19 defying gains in global equities, which outstripped weaker performances in asset classes such as fixed income.
The performance last year allowed the BPOPF to declare returns ranging between 23% and 7.5 percent for the different member portfolios, some of the highest numbers for a single year.
BPOPF CEO, Moemedi Malindah told BusinessWeek the fund’s investment strategy was being revised as part of regulations that require pension funds to review their strategies every year or when there are certain triggers that happen to the portfolio or membership.
The review will see a shift in allocations for the different asset classes within which the fund is invested. At present, just over 33% of the BPOPF’s assets are invested locally in equities, bonds, cash and property. The balance is invested in offshore equities, bonds, South African inflation-linked bonds, offshore alternatives, offshore cash and property. About 2.02 percent is invested in China.
“The purpose of the exercise is to have an efficient portfolio meaning to structure the asset classes in such a way that the highest expected return for the level of risk is achieved,” Malindah said. “It is a scientific process and we cannot anticipate the outcome, save to say it goes through a lot of deliberations by different governance structures of the fund.”
The BPOPF has come under pressure from local commentators on the level of its investments locally, particularly as funding gaps exist in the development of public infrastructure. Last year, the fund revealed that it had set aside P3 billion to be invested in local infrastructure in the next two years.
At the time, Malindah told BusinessWeek the fund was open to partnerships to develop infrastructure such as roads, electricity and its transmission, water and others.
“Take Gaborone for example. We don’t know what the council’s plans are, but they may have big ideas and they may package that and say this is how we think it can be funded and you can participate. “For many years, we wanted to invest in infrastructure and we struggled. “We wanted to do it through a manager but we could not find one when we went to the market,” he said.
In his latest update, Malindah said progress had been slow on moving funds into infrastructure, due to the complexity of projects being proposed.
“A power plant can take 18 months just in discussions and moving into infrastructure has been slow, but it’s one good growth area, which we feel we are losing out on,” he told BusinessWeek. “There are things being advanced to the board and I can say we are working hard on that.”