The Government Employees Pension Fund (GEPF) underperformed its index benchmark by 38 basis points due to its overweight position in equities and bonds, says the Public Investment Corporation (PIC) in its 2010/11 annual report.
GEPF is the largest pension fund in South Africa with more than 1.2 million active members and 300,000 pensioners and beneficiaries. In 2010 the GEPS had total reserves and investments to the tune of more than R800 billion.
In its annual report, the PIC commented on the performance of the GEPS saying that owing to the long-term nature of the GEPF liabilities and the size of funds under management, its investment strategy was to focus on diversification and long-term investment horizons.
The equities portion of the GEPF delivered a return of 15.3% versus a benchmark return of 15.5% due to the underperformance of British American Tobacco. According to the PIC, if British American Tobacco had not been included, then the fund would have beaten the benchmark by 24 basis points.
The PIC said that internally managed equities delivered excess returns of 16 basis points and that the sector-rotation strategy had paid off. However, it said that while externally managed equities delivered a return in excess of 48 basis points there was still room to generate more excess returns by actively managing the portfolio of fund managers.
“A review of this is being under taken to optimize the number of managers,” the PIC said in its annual report.
The GEPF's capital market portfolio outperformed its benchmark by 37 basis points with most of the positive contribution coming from conventional bonds. The fund returned 9.6% for the year ended March 2011 and the PIC said this could be attributed to successful active management of duration and relative value strategies.
The property leg of the GEPF investments outperformed its benchmark by 234 basis points during the year under review.
The PIC said this was due to listed property and net income in the directly held properties being the largest contributors.
Materials handling group Afrisam apparently blotted the copybook for the Isibaya Fund, which invests in young companies started by previously disadvantaged individuals. The PIC said that the fund returned 17.4% for the year, but that it was below the benchmark by 0.3% if Afrisam was taken into account.
The PIC also manages a number of social security funds where the mandates are for very limited risk and with a greater focus on short-term liquidity.
The Unemployment Insurance Fund's portfolio outperformed its benchmark by 74 basis points with a return on 9%.
The Compensation Commissioners Pension Fund's assets made a return of 10.2% as it outperformed its benchmark by 34 basis points.
The Compensation Commissioners Fund's assets returned 8.4% as it outperformed its benchmark by 42 basis points. - I-Net Bridge