Pension fund deflects impairments

Moneyweb

The Government Employees Pension Fund (GEPF) announced its financial results for the year ended March 2018, with investments generating an 8.5% average return (2017: 4.3%).

Its investment portfolio improved, as domestic bonds and equities registered strong returns. Listed equities increased 10%, domestic bills and bonds 6%, foreign collective investment scheme 7% due to new investment, while domestic unlisted equities increased 37% “as a result of a positive fair value adjustment and additions”, the GEPF stated.

Despite a 0.05% decrease in total membership, member contributions improved 7.3% to R70.4 billion, attributed to salary increases. Following the membership drop, the GEPF’s set to implement cost-containment strategies to improve performance. “At one level, we need to watch the administrative costs. But we also need to watch the fee we pay to the Public Investment Corporation (PIC) as an investment manager.”

The GEPF recently made headlines after confirming two investments of R5.3 billion were flagged as impairments. Among them is its R4.3 billion venture in Steinhoff’s Lancaster, which later lost its value after the Steinhoff scandal.

“The reduction in the share price of Steinhoff has had implications on the structure that was put in place to enable the black participants to take part in Steinhoff,” says principal executive officer Abel Sithole.

“This is covered through an option the PIC entered into with a major international bank which means that at this point in time, that value is still protected but we also need to recognise that the difference between what is protected and the share price might present some headwinds if Steinhoff does not recover.”

It remains unclear as to when it’ll write off the Steinhoff investment.

In addition, R1 billion in loans to Iqbal Surve were written off.

The annual report shed light on GEPF’s accumulated funds and reserves, which have grown at an average 10.21% over the decade, but also alluded to more exposure to toxic assets like a R375 million investment in VBS Mutual Bank.