BPOPF�s delicate balancing act
Brian Benza | Friday September 25, 2015 15:39
Sitting on an asset base worth as much as P51 billion ($5 billion), the Botswana Public Officers Pension Fund (BPOPF) is one of the largest pension funds in sub-Saharan Africa. About 35 percent of these funds are invested in Botswana.
Although BPOPF is above the regulatory 30 percent onshore investments threshold, market sentiment, which came to the fore during the recent liquidity shortages in the banking system, is that more pension funds should be brought back home to spur the domestic economy rather than promote the growth of foreign economies.
BusinessWeek: How have you settled in your new job?
Molefe: I am in my third month as the new CEO now and of course it’s a new environment, but I think I am settling in comfortably.
BusinessWeek: The fund’s assets now top P50 billion, how and where are they invested?
Molefe: Roughly 65 percent of the funds are invested offshore in vehicles such as equities, bonds and alternatives.
Locally we are also invested in equities and bonds and as we recently announced, we now have private equity locally and an infrastructure fund, which we are just about to award to an asset manager.
We are also invested in property directly and through two fund managers, Messidor and Fleming asset management.
BusinessWeek: How big is the infrastructure fund?
Molefe: The fund is worth P800 million and we are currently doing due diligence. We have a definition of what sort of infrastructure we are going to invest in and the manager that we have picked also has a good understanding of our definition of infrastructure. The fund is part of our efforts to invest in the domestic economy.
BusinessWeek: There are suggestions that the fund should scale down offshore investments. What are your views?
Molefe: We are always guided by what is available on the market. You have to remember that at the end of the day we are managing pensioners’ funds and our job is to try and get the highest returns for them. We believe we should play a meaningful role not only in making our members’ life better after retirement, but also in the development of the economy. So if we can find a home for the funds at the right returns, we are willing to bring back some of the funds.
BusinessWeek: Are there any immediate opportunities that you have identified locally?
Molefe: At the moment, the global equities are doing very well and for the sake of our members and their long-term fulfillment we should still be looking to global markets.
BusinessWeek: Are you working with other stakeholders to help develop the local capital markets so that you can invest more locally?
Molefe: Of course, we cannot keep saying we will bring back the money in the long-term because in the end that could just end up looking like it’s an excuse. We don’t want that to be the mantra, where we keep saying there is no suitable local home for the money. We can develop the capital markets and we are working with other partners. Countries such as Mauritius have really developed their capital markets quite well and we can do the same.
BusinessWeek: The recent liquidity shortages in the banking system, could that have been an opportunity for the fund to invest locally?
Molefe: Yes it could have been, but we are always cautious not to push these industries to the brink. At the peak of the liquidity crisis, banks were taking money, yes but it’s been at the right cost and it ended up affecting them negatively. In as much as we want to participate in the domestic capital markets, it’s a delicate balancing act where we also have to be careful not to collapse industries deliberately by pushing them for large rate of returns when we know that they also have their own constraints. So I think there is need for the whole industry, including the banks, to find sustainable solutions. You would be aware, we have also been participating in local bond issuances, particularly the long-term ones so that we are able to back our annuity liabilities.
BusinessWeek: There have also been questions about your investments in Bona Life, What would be your response?
Molefe: The investment in Bona Life, as you are aware was not done by the fund directly. It was through the Botswana Opportunities Partnership (BOP), in which we have allocated P500 million as private equity. The aim of BOP is to get as many investors as possible including other pension funds.
The operators of BOP pick where to invest the money and us as BPOPF we are just limited partners and so will other investors in BOP. Capital Management Botswana (CMB) is the general partner and they are the ones who choose where to invest the funds. In fact, if we try and influence where the money is invested, then we lose our limited partner status. It’s similar to our other asset manager that invests in equities, we just give them an allocation, but we don’t pick the stocks to invest in for them. None-the-less, we believe that CMB has the expertise to make the right investment decisions.
BusinessWeek: The recent exercise where the fund withdrew some mandates from some managers and awarded new ones, is it complete now?
Molefe: Yes, that exercise is done now. Money is now settled into the right place in the right amounts with the right managers. We are happy that the process in done.