The Government Employees Pension Fund (GEPF) is planning to invest more of its R2-trillion under management outside the country and in unlisted assets to reduce risk of overexposure to locally traded companies.
The strategy was outlined by GEPF principal executive officer Abel Sithole to a commission of inquiry into allegations of wrongdoing and poor governance at the Public Investment Corporation (PIC), the fund’s biggest manager.
The GEPF has more than 93% of its assets invested in SA and is a significant holder of SA government bonds and those of state-owned entities (SOEs), he said.
“We now need to have that discussion with the finance minister,” Sithole said. The GEPF’s “significant home bias” is not wrong and has historically served the GEPF well, but it needs to manage risk, he said.
Moving more GEPF cash offshore could send shockwaves through SA’s listed companies, many of which count the PIC as their biggest shareholder. Meanwhile, increased investment in unlisted assets may help back new industries and support black entrepreneurs, he said, part of a wider initiative to redress economic imbalances caused by apartheid.
The PIC is the subject of a judicial inquiry into whether the entity deviated from its mission to best safeguard pensions for more than 1.2-million SA state workers. The company has suspended staff that it says flouted governance and approval processes when making investment decisions, some of them linked to unlisted assets. In contrast, the PIC repeatedly assured the GEPF that correct governance processes were followed, Sithole said.
“The GEPF views this as a serious breach of trust,” he said. The fund is not “solely concerned if the PIC survives or not” as it is not the only asset manager around.
When asked by one commissioner how much the GEPF would look to invest outside the country, the executive said private SA pension funds are able to keep as much as 30% of their assets offshore. The GEPF would not do the same immediately, but it would “probably make sense over time,” noted Sithole.
Doubling the GEPF’s unlisted investments in SA to 10% would help spur the economy, Sithole said. The GEPF wants the PIC to seek approval for all investments of more than R2bn.
The inquiry continues on Tuesday with further testimony from PIC’s former CEO Daniel Matjila. – Bloomberg