/ 27 March 2012

Government pension fund to invest outside SA

South Africa’s Government Employees Pension Fund (GEPF) is considering investing around $22-billion outside the country to diversify its risks and some of that may go to other African countries and emerging markets.

Africa’s largest retirement fund, with a portfolio of about $150-billion, traditionally has had most of its investments centred within South Africa, but it now sees a window of opportunity to invest about 14% to 15% of its portfolio in Africa and global markets, John Oliphant, head of investment and actuarial at the fund, said on Tuesday.

“We are starting to expand our Africa portfolio and our global portfolio with a bias towards emerging markets … in limited capacity,” Oliphant said on the sidelines of an industry conference in Singapore.

“In fact we have moved some of the money already.”

Oliphant said he was looking at increasing the retirement fund’s exposure to Africa to 5%, excluding South Africa.

“In terms of the exposure … now we want to have about 9% exposure to global markets with a bias towards emerging markets,” he said, without giving details.

Direct commodity investments?
The fund, which already has an estimated 15% exposure to resources via its equity investments, is now looking at possibly direct commodity investments, said Oliphant.

“The GEPF asset allocation to equities is about 50%, and if you assume that the resource sector is about 30% of the Johannesburg Stock Exchange, one would argue that resources from about 15% of the GEPF portfolio,” he added.

Strong infrastructure growth globally is likely to make industrial metals like iron ore and copper a more attractive direct commodity investment for the retirement fund, Oliphant said.

“So we view at the back of that demand you should have a bit of price inflation for commodities which is good for investors,” Oliphant said.

But any eventual move towards investing directly into commodities will have to be followed by a decision to lower the fund’s exposure to resources through equities.

“This is quite a large exposure to resource companies and that has always ascertained the impact on our thinking about having direct exposure to resources, because you don’t want to have an over-concentration of one sector in relation to the overall portfolio,” Oliphant said. — Reuters