The outsourced assets of the Public Investment Corporation (PIC) grew by 31% to R395 billion at the end of March 2021. This was higher than the R301 billion in March 2020 according to the PIC annual report published last week.
The asset manager attributed most of these gains to domestic and global equity returns, which significantly outperformed other asset classes from an absolute return perspective during its financial year.
The external managers of the PIC comprise eight global and 20 national companies managing R178 billion and R217 billion respectively.
The PIC, South Africa’s largest asset manager and wholly owned by the government, also announced that its total assets under management (AUM) for the financial year ended March 31, 2021 grew by nearly R440 billion to R2.3 trillions.
The asset manager’s listed stock division increased its AUM by 51.4% during the 12 months ending March 2021 to R838 billion. The PIC’s listed investment portfolio outperformed the composite index for the three years ending March 2021 by 0.21% cumulative, the asset manager said.
PIC CEO Abel Sithole wrote: “This performance is a demonstration that PIC’s diversified investment strategy works.
“Despite the formidable and adverse conditions it faced during the year under review, the PIC showed remarkable resilience and versatility in the performance of its investments.”
In its bond portfolio, PIC’s fixed income team purchased conventional bonds and inflation-linked bonds in response to rising yields, primarily in the first and second quarters of 2020.
“Higher yielding bond purchases and subsequent bond market rally during the period under review contributed to the outperformance of PIC’s internally managed conventional bond funds versus the benchmark FTSE / JSE All Bond index,” wrote the PIC.
The PIC said investment prospects remained “very uncertain” one year after the Covid-19 pandemic.
“New virus mutations and the accumulation of human victims are worrying, even as increasing vaccine coverage raises confidence. Economic recoveries diverge across countries and sectors, reflecting variation in pandemic-induced shocks and the degree of policy support.
“The outlook depends not only on the outcome of the battle between the virus and vaccines, but on the effectiveness with which economic policies implemented under conditions of high uncertainty can limit lasting damage.
“The International Monetary Fund projects global growth of 6% in 2021, moderating to 4.4% in 2022. Listed real estate companies will be negatively affected as rents come under greater pressure, reducing the value of properties. assets and increasing balance sheet risk.
“While the earnings of most companies will rebound strongly from a low base, this will largely be reflected in stock prices, and further disruptions from Covid-19 will be a headwind. The implementation of vaccination should help the economies return to a level of normality, ”said the PIC.
On the JSE, the PIC said that the one-year price-to-earnings (P / E) multiple of the FTSE / JSE All-Share (Alsi) index was trading at 10.6 times, representing a discount from the historical average. of 14.8. times, and this suggested that the local market was cheap.
“Fair value models indicate that Alsi will yield 14% over the next 12 months driven primarily by financial and technology stocks,” the asset manager said.
The asset manager plans to continue developing its ability to invest in the global equity markets.
On governance, the PIC said that during the year ended in March 2021, it attended 72 participation meetings of investee companies and voted 3,306 resolutions in 207 company meetings. He voted in favor of 88.4% of the resolutions and against 11.5% of them.
Of the three key issues he voted on, two were related to corporate compensation and the third to the re-election of the company’s auditors.
UIF AUM drops
PIC’s annual report shows that all its clients’ portfolios grew during its last fiscal year, except that of the Unemployment Insurance Fund (UIF).
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The portfolio of the Government Employees Pension Fund, PIC’s largest client, which constitutes 89% of PIC’s assets under management, grew by 28% to more than R2.1 billion, from R1.6 billion in the year previous financial statements in line with the recovery in national and global markets. .
The FIU portfolio, PIC’s second largest client with 5% AUM, decreased by 24% from R151 billion to R115 billion.
“The decrease was due to withdrawals from the fund to comply with the Covid-19 Employee / Employer Temporary Assistance Plan,” the PIC said.
Investments and unlisted properties in the PIC experienced further impairments for fiscal 2021 due to decreases in valuation.
“The growing list of deficiencies is due to external factors related to the adverse national economic environment. Previously, the PIC Commission’s findings pointed to failures in the investment process and possibly unethical behavior, insufficient effort in investment analysis, and inadequate care to avoid investments that are unlikely to meet growth and income expectations, ”said the PIC.
“The PIC has reviewed its structures, processes and decision making and will continue to improve to minimize impairments that are directly related to these factors,” said the asset manager.
Sithole said the PIC was implementing the Mpati Commission of Inquiry recommendations.
“The board is leading the implementation with the help of an advisory panel led by retired Judge Yvonne Mokgoro. With the help of the advisory panel, the board is crystallizing those aspects of the Mpati Commission’s recommendations that merit a forensic investigation. In addition, the PIC is working closely with law enforcement agencies to ensure that those involved have their day in court, “he added.
The PIC reported that its total irregular spending was 8 million rand for its fiscal year 2021, down from 14.2 million rand in its fiscal year 2020. The asset manager said it was trying to find solutions to its investments. struggling such as Steinhoff and Ayo Technology Solutions.
Read: Steinhoff initiates conciliation proceedings
Justin Brown is a reporter for Citywire, providing insights and information for professional investors around the world.
This article first appeared on Citywire South Africa hereand republished with permission.