GEPF can now invest 15% of its assets abroad, but there is no rush

GEPF concluded negotiations on the geographic allocation of its assets in October 2020. The revised allocation for offshore investments has been increased from a maximum of 10% to 15%.

  • The GEPF says it concluded negotiations with the Minister of Finance on the geographical distribution of its assets in October 2020.
  • The revised allocation for offshore investments has been increased from a maximum of 10% to 15%.
  • Prior to this review, GEPF could only invest 10% of its assets of over R2 trillion outside of South Africa.

The Government Employees’ Pension Fund (GEPF) said it was given the green light to invest up to 15% of its assets abroad. The civil servants’ pension fund had been negotiating with the Treasury to allocate more of its money overseas since the days of Public Investment Corporation (PIC) CEO Abel Sithole, when he was still its CEO .

GEPF could only invest 10% of its assets of more than R2 trillion outside of South Africa.

During the presentation of the integrated report and the group’s 2021 financial statements on Thursday, the CEO of GEPF, Musa Mabesa, said that the GEPF had concluded negotiations with the Minister of Finance on the geographical distribution of its assets in October of the last year.

“The revised allocation for offshore investments increased from a maximum of 10% of the total [assets under management] up to 15%, ”Mabena said.

He said it was desirable that there is no big movement in the percentage of assets that GEPF can invest abroad. The fund would not want a “big bang approach” on this.

“You will understand that if we were to move the bulk of our investments outside of South Africa, it would have a devastating impact on the economy itself due to the size of the GEPF,” Mabena said.

However, the fund did not even reach the 10% allocation. The pension fund is still reviewing some of its investment mandates with the PIC, which will likely change its offshore asset allocation in the future.

“The coincidence that we are revising the mandate with a revision of where we want to invest allows us to work on these two simultaneously. And then once we’re ready to implement this [offshore allocation] will begin to appear in future annual reports, ”Mabena said.

But he stressed that, given the size of the GEPF, it will manage future offshore allocations “with sensitivity”. First, we have to achieve the 10% offshore allocation. 100 which has always been allowed, then go from there. But he said the national bias towards SA worked in favor of GEPF during the year ended in March.

Thanks to favorable market movements during the 12-month period to March 31, GEPF’s assets reached R2 trillion for the first time in the first quarter of 2021. The fund’s value grew 27.5% per year. compared to what he published at the end of March 2020.

The fund said the annual returns of international portfolios were very high in US dollars. But a stronger rand moderated these returns to 28.5% for stocks and minus 5.11% for bonds in terms of the rand. In comparison, GEPF’s equity and bond portfolios in South Africa returned 48.49% and 15.83% respectively.

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