The country’s single largest investment fund, the Botswana Public Officers Pension Fund (BPOPF), has thus far this year recorded returns of about 10%, swimming against the tide of market-related losses associated with the coronavirus (COVID-19).
The fund, which holds the pensions of thousands of civil servants, reportedly has assets of above P73 billion, having closed at about P66 billion in the year ended March 31, 2020.
The fund’s performance comes as world economies shake from the pandemic’s impact, with COVID-19 spreading panic and wreaking havoc with various asset classes across the markets.
At least 60% of the BPOPF’s assets are invested offshore across various classes and jurisdictions, while the balance is held locally, largely on the Botswana Stock Exchange (BSE) and in property.
By Wednesday, the BSE’s main platform, the Domestic Companies Index, had fallen 7.4 percent in the year-to-date, while, by comparison, the JSE Top 40 Index had fallen by nearly 18% for the year up to September 30, 2020.
“We are surprised because the portfolio has had a strong performance with about 10% in returns,” BPOPF acting CEO, Moemedi Malindah told BusinessWeek during a recent briefing.
“The market is not reacting as we would have thought it would because of COVID-19, but the economy is.
“The economy may not be performing well but our markets are.” Malindah explained that the offshore market, which holds the bulk of the fund, has performed well, while the investment strategy adopted for the local market has paid dividends.
“Locally, we are not invested in the same weighting as the local BSE. “The BSE may be down one percent, as an example, but due to our weighting we may be up one percent. “One counter may be a major loser, but we may not be invested in that counter. “We appointed an active manager for the BSE
“We always have to beat the benchmark and our strategic plan is to beat it by 1.25% percent,” he said.
Malindah added: “We expected some growth because of the way the portfolio is structured, but when we hit double digit numbers, we too had to ask ourselves ‘are we sure these are the numbers?’”
The BPOPF, however, is wary of celebrating early due to the lessons from 2019. In the last financial year, the BPOPF’s returns were up seven percent until a tough fourth quarter saw the annual returns turn negative one percent.
“Right now we are in a comfort zone in terms of the returns, but last year we were also doing well and lost out in the three months,” the acting CEO said.
The year-to-date returns for the BPOPF hold the fund in good stead, as it is required to achieve nine percent annual growth between now and 2022, the last year of its five-year strategic plan.
Originally, the plan required the fund to target seven percent annual returns, but fluctuations in previous years have raised the required rates for the final years.
“We are focussed on diversification of the portfolio, such as through going into China, Africa and infrastructure, which is solid and can anchor our base,” Malindah said.
Earlier this year, the BPOPF broke into China, appointing two fund managers and allocating a P2 billion portfolio. The fund has also approved a P3 billion allocation for local infrastructure opportunities over the next two years.