The country’s pension funds emerged bruised from a difficult 2018, with their collective assets declining by P3.7 billion, mainly due to the weak performance of offshore asset classes.
Bank of Botswana (BoB) figures released this week indicate that the country’s pension funds ended the year with assets worth P78.97 billion, down from P82.69 billion as at January 2018.
The pension fund arena is dominated by the Botswana Public Officers Pension Fund, which had assets of about P60 billion by late last year, and the Debswana Pension Fund (DPF) that ended the year with assets of P7.14 billion.
While central bank statisticians did not provide qualitative reasons behind the drop in assets, the numbers indicate that the biggest knock came from pension funds’ offshore investments in various asset classes.
Offshore equities traditionally take up the lion’s share of pension fund investments, compared to other asset classes and by December, accounted for 46% of total pension fund assets.
The value of pension fund assets invested in this particular asset class dropped from P40.8 billion at the beginning of the year, to P36.6 billion by the end of the year.
The drop resonates with recent commentary by DPF, which stated that global emerging market equities were their worst performing asset class, declining by 7.2% in 2018.
Pension funds also shed value in offshore bonds, which opened the year at P9.7 billion, dropping to P5.9 billion by December 2018. Another asset class losing value during the year was offshore cash holdings, which dropped 54% to P1.1 billion.
Local investment classes were a mixed bag, with pension funds invested in domestic equities declining by 10% to P13 billion.
Local cash holdings rose from P2.9 billion to P6.6 billion during the year as asset managers shifted more of their holdings back home, while holdings in domestic bonds, local Exchange Traded Funds and unlisted local equities all rose.
By December, just 57.4% of local pension fund assets were invested offshore, from 64.7% at the beginning of the year.
The December level represents the lowest offshore holding of pension fund assets since April 2015.