The Government Employees Pension Fund (GEPF) has delivered a strong set of results, with its investment portfolio breaking the R900bn mark for the first time since its inception in 1996.
During the 2010/11 financial year the value of the GEPF’s assets under management grew 14,2% to a staggering R911,5bn from the R798,3bn recorded the previous year.
The GEPF now has 1,2m active members and 345,500 pensioners, and is South Africa’s premier investor and the single largest investor in different companies listed on the Johannesburg Securities Exchange (JSE). The GEPF also invests in government bonds, property as well as unlisted equities.
Through its Developmental Investment Policy, the fund has committed 5% of its portfolio to infrastructure projects, the green economy, amongst other developmental initiatives, says GEPF principal officer John Oliphant. A further 5% has been committed to pursue investment opportunities in other African countries. Currently, the GEPF has a small investment exposure in certain African markets of about R825m or 0,1% of its portfolio through the Pan-African Infrastructure Development Fund (PAIDF). For its part, the PAIDF has invested in transport, telecommunications and other infrastructure projects to accelerate Africa’s growth.
“The GEPF invests in the PAIDF because the growth and development of SA’s economy is inextricably linked to development elsewhere in Africa,” Oliphant asserts. “The PAIDF seeks to play a critical role in helping African economies to meet capital requirements in financing infrastructure investments in order to enable the continent to achieve sustainable growth. We believe that investing in the PAIDF will be socially and financially beneficial to our members and pensioners.”
The GEPF uses an environmental, social and governance (ESG) framework to measure the impact of Isibaya’s unlisted investments on poverty alleviation, job creation, black economic empowerment and regional development. Notably, last year Isibaya approved R3bn worth of deals in education, including school level and post-matric; low-cost housing – expected to provide 150,000 units over the next five years; and business micro-finance for rural women.
During the 2010/11 period members’ contributions rose by 12,8% to R40bn from R36bn due to a growing GEPF membership and an increment in members’ salaries. On the other hand, the fund paid out R30bn in benefits (including retirement and funeral benefits).
Having managed a return on investment of an impressive R105bn or 12,2%, the GEPF is on a solid trajectory, notwithstanding the fact that the world has not yet fully recovered from the effects of the economic recession. Over the last two years the GEPF’s investment portfolio has yielded positive returns, after briefly falling into the red in 2009 at the height of the global financial crisis.
GEPF Chairperson Arthur Moloto ascribes this year’s stellar set of results to the management’s unwavering commitment to serve and protect the members’ and pensioners’ interests. In terms of the actuarial valuation, the GEPF ended 2010/11 with 100% in funding level. This is of significance to members since it confirms that GEPF assets cover actuarial liabilities in full. An actuarial valuation, performed every three years, assesses the current solvency and future funding of the value of the pension fund’s assets and liabilities.
Importantly, Moloto adds, the GEPF is not just about financial returns. For instance, the GEPF has played an active role in the development of the Code for Responsible Investing in South Africa which comes into effect on 1 February 2012.
In addition, the GEPF chairs the local South African Network of the UN-backed Principles for Responsible Investment and is also represented in the Emerging Markets Disclosure Project which engages with JSE Top 40 companies excluded from the JSE’s annual Socially Responsible Investment (SRI) Index.
Looking ahead, Moloto says he is hopeful that the fund’s robust investment strategy will grow the assets to R1trillion in not a too distant future.