PIC attributes slump in assets under management to pandemic
CAPE TOWN - THE PUBLIC Investment Corporation (PIC) has reported a decline in assets under management (AuM), which it attributed to, among other factors, the impact of Covid-19, particularly during the last months of the 2019/20 financial year.
AuM fell to R1.907 trillion for the year to March 2020 from R2.131trln a year ago.
Local listed equities and property portfolios were most affected, declining
19 and 24 percent respectively, according to the report tabled in Parliament on Thursday.
PIC chairperson Dr Reuel Khoza said the entity was well on track to achieve its investment objective of growing clients’ assets before the Covid-19 crisis caused untold damage to financial markets.
“Notwithstanding the impact of the Covid-19 pandemic, the PIC remains committed to delivering on the investment mandates of its clients and we are already seeing signs of recovery in AuM. Most importantly, the organisation remains financially sustainable,” he said.
The PIC was a subject of an investigation into impropriety by the Commission of Inquiry led by retired Judge Lex Mpati. The findings of the commission pointed to lapses in governance at the PIC.
PIC chief executive Abel Sithole said Africa’s largest asset manager remained committed to and focused on its long-term investment strategy.
“We are confident that this investment approach will continue to yield positive returns for our clients. The investment strategy focuses on building a diversified portfolio strong enough to withstand and absorb unanticipated market shocks. In addition to creating financial returns, our investments must also create jobs and expand the provision of infrastructure and social services,” he said.
The auditor-general’s report noted that some services were not procured through a procurement process that is fair, equitable, transparent and competitive, as required by the Public Finance Management Act.
It said effective and appropriate steps were not taken to prevent irregular expenditure amounting to R9 817 000, and most of the irregular expenditure was caused by deviations from the normal procurement process that did not comply with National Treasury Instruction Note 3 of 2016/17.
“In some instances, enhanced due diligence was not performed on politically exposed persons (PEPs) at pre-investment and for PEPs identified after the approval of an investment as required by the established policy.
“In some instances, I was unable to confirm the adequacy of pre-investment due diligence, including pre-investment valuation of investments deals, due to supporting documentation not being available and inadequate justification of assumptions used in the valuation. “I was unable to confirm the adequacy of collateral on debt instruments as the entity did not have a collateral management policy/framework,” read the auditor-general’s report.
At a broad level, the PIC’s portfolio comprises domestic listed equities, unlisted investments, offshore and rest-of-Africa investments. The domestic listed equities portfolio is made up of in-house managed listed equities, externally managed listed equities, bonds, cash and money markets and listed properties.
The unlisted investment portfolio is made up of private equity, impact investing and unlisted properties. The offshore and rest-of-Africa investment portfolios are made up of global listed equities, global listed bonds, Africa listed investments and Africa unlisted investments.
The report states that during the financial year under review, the PIC continued to invest to support development focusing on job creation, contributing to transformation and advancing economic empowerment.