Offshore instability cuts BPOPF’s assets by P3bn
Assets under management at the Botswana Public Officers Pensioners Fund (BPOPF) slipped to P87 billion as at October 2022, down from about P90 billion in March due to instability in invested markets, BusinessWeek has learnt.
Addressing the media recently, the fund’s Chief Investment Officer, Tshephang Loeto said producing positive returns in the markets has been difficult ever since the end of the financial year in March, particularly on the offshore side.
“In April, May, June there were more negatives than the positives which were muted,” he said in response to BusinessWeek enquiries.
“October was a better month compared to other months before, according to what we have gathered.
“November was also better than October and we are hoping that markets will work in our favour.”
The Non-Bank Financial Institutions Regulatory Authority (NBFIRA), which regulates pension funds amongst others, recently noted that the value of assets held by local pension funds dropped to P113.5 billion in September, more than P5 billion down from the January position, due to turbulence in global markets.
Much of the losses in pension funds this year are associated with investments in the international tech sector, where downtrends in global giants such as Facebook, Apple, Amazon, Netflix, and Google (known as FAANG) have led to market turbulence.
By the beginning of the month, Facebook, known as Meta, had shed 70% in its share price or $640 billion, while the others had equally retreated by between 15% and 50%, wiping billions of dollars more off the books for investors.
According to Loeto, the turbulence has impacted the performance of the fund to date as it is slightly on the negative side.
He, however, said the BPOPF still had its head above the water in terms of performance due to its diversified portfolio. The BPOPF has previously revealed that it pursues an active investment approach where its fund managers select top-performing investment vehicles rather than the passive investment approach.
“Regardless of the liability pool that we are in, we make sure that we are always adequately diversified at any point in time,” Loeto said.
“We think preservation is important when thinking of generating additional returns, which we normally do in a phased steady manner because if we were only invested in majority technology stocks, we would be crying now.”
Last year, the value of all local pension fund assets surged to P120.1 billion in December from P106 billion in January, buoyed by the robust performance of the FAANG group.
Loeto said the regulatory changes requiring pension funds to invest at least 50% of their assets domestically, could initially result in muted returns. The new changes, brought about by amendments to the Retirement Funds Act, are expected to kick in next year and revise the current status where pension funds are required to invest a minimum of 30% domestically.
“As the money goes back temporarily we could experience muted returns because we are still trying to find ways in which we can deploy those funds.
“But in the long term, it is expected that it will benefit the country and the members of the pension fund. “Those returns will return to normalised levels.
“We don’t think that it is going to shock the market to the extent that a lot of people might be thinking.
“The opportunities are there for us as the pension fund and we are ready for them,” the chief investment officer said.