The PIC and your pension: Profit or politics? | Fin24
 
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The PIC and your pension: Profit or politics?

Dec 04 2015 06:00
Marcia Klein

Its ongoing support of troubled platinum miner Lonmin has prompted renewed questioning of the role and responsibilities of the Public Investment Corporation (PIC), which manages R1.81tr of government employees’ pension fund money.

The PIC’s raison d’être is to look after and make good returns on the money it manages on behalf of the workers and pensioners whose funds it invests.

With assets under management equating to about a third of South Africa’s GDP, this is a responsibility not to be taken lightly.

However, it is also mandated to invest in deals that are aligned with government priorities including transformation and job creation, a mandate which is open to interpretation, and even, possibly, exploitation.

More and more questions are being raised about the motivations for a number of its deals, which may in some cases be political rather than financial or socioeconomic in nature.

A Financial Times article in February 2014 said the PIC, which ranked 14th of 100 in Sovereign Wealth Fund Institute rankings, “at times struggles to shed the perception that political considerations as much as financial ones guide its investment decisions”.

According to its latest annual report, the PIC’s assets under management were as follows:

- Government Employees Pension Fund (GEPF): R1.61tr (88% of assets under management);

- Unemployment Insurance Fund: R113bn;

- Compensation Commissioner Fund: R33bn;

- Compensation Commissioner Pension Fund: R17bn; and

- Associated Institution Pension Fund: R15bn (among others).

Over many years it has evolved from a largely bond-invested organisation to one invested in equities, private equity, “developmental investments” and investments outside of SA.

While equity investments now dominate its portfolio, other newer investments are relatively small.

As at 31 March, the end of the financial year, equity investments accounted for 48.68% of its portfolio.

Local bonds accounted for 34.31%, cash and money market 4.46%, properties 5.19%, offshore equity 3.91%, offshore bonds 1.4% and Africa equity (outside SA) 0.65%.

“Our focus on developmental investments and private equity is based on evidence that these asset classes have direct impact on economic growth through job facilitation, transformation and improvement of ordinary people’s lives.

“The focus of the private equity portfolio is to drive transformation in previously untransformed sectors as well as supporting emerging black industrialists,” the PIC says in its annual report. 

This is an excerpt from an article that originally appeared in the 10 December 2015 edition of finweek. Buy and download the magazine here

lonmin  |  pension fund  |  equities  |  investment  |  government
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