Debswana Pension Fund rises P500m despite COVID-19
Pauline Dikuelo | Friday November 13, 2020 16:53
The DPF is the country’s second largest pension fund after the Botswana Public Officers Pension Fund (BPOPF) which recently announced its returns this year had climbed 10%, lifting assets to P73 billion.
At the last count, the BPOPF had more than 160,000 members, while the DPF as at September 2020 had about 12,500.
Responding to BusinessWeek enquiries, DPF chief executive officer (CEO), Gosego January noted that the growth in assets under management was not without a COVID-19 knock. From an opening position of P8.35 billion at the beginning of the year, the DPF’s assets fell to P7.82 billion in March during the height of the COVID-19 uncertainty.
The fund, however, recovered to P8.52 billion by June 30, before adding another P300 million to close at P8.83 billion as at September 30.
“During the six-month period from January 1 to June 30, 2020 the best performing asset class has been global bonds, which returned 14.79%,” January said in an emailed response.
“The next best performing asset class was domestic bonds, which returned 14.1%.
“The bond rally was underpinned by key policy rate cuts by central banks across the globe in a bid to promote economic activity, which dropped due to the restriction of trade and normal business as the world tackled the outbreak of COVID-19.”
The CEO said the DPF operates a liability driven investment strategy, which is tailored specifically to meet the fund’s liabilities.
“Against this background, the fund seeks to invest in a diversified pool of assets with low correlations and high risk adjusted returns, which form the strategic asset allocation that is geared towards outperforming during different market cycles, which can be characterised by risk events,” she said.
In an effort to enhance the diversification of its portfolio, the DPF recently added China to its holdings, earning a 20.5% return over the three-month period to June 30.
January further said the fund has a long-term investment horizon, which invests in riskier assets such as equities for younger members and safer assets such as bonds for older members. This investment strategy does not necessarily react to short-term market movements.
“The fund has implemented a default life stage model for in-service members since August 2004. Based on an assumed retirement age of 60, the members’ retirement savings will be invested in the Market Portfolio up to age 53, which is then transitioned to the Conservative Portfolio,” she said.
At retirement, the members’ assets are invested in the Pensioner Portfolio. The Market Portfolio would ordinarily invest in riskier assets such as equities and as the member approaches retirement the life stage model invests in safer assets such as bond and cash.
“All asset classes and asset managers are constantly monitored, on a real time basis in order to optimise the investment strategy,” she said.
The CEO, however, said the Board of Trustees had decided to remain cautious in awarding this year’s pension increase in order to ensure that future adjustments are protected and can be awarded in line with the level of inflation in the future.
The Board of Trustees awarded a four percent pension increase in 2018 and in 2019, 2.2 percent increase in line with inflationary increases, which effected on July 1, 2020.