Wednesday, January 26

GEPF reaches milestone R2trn – Moneyweb

SIMON BROWN: I’m chatting with Musa Mabesa. He is the chief executive officer of the Government Employees Pension Fund. The GEPF had some figures yesterday afternoon for the year ending in March. Musa, I appreciate today’s time. The growth of its fund in the year increased by 27.5%. That is a great return. Of course, it must be taken in light of previous periods, when, of course, we had seen the Covid collapses happening as that year-end progressed in March of last year.

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MUSA TABLE: In fact, Simon. We have seen a notable increase in the value of our investment in very extreme and difficult circumstances with Covid, and uncertainties in the market. But [we saw] the figures bounce [in] financial markets, largely our stocks listed in the bond portfolio. That contributed a lot to the market value rising to just R2.1 trillion this year as of March 1, 2021.

SIMON BROWN: Yes. Perhaps the most important number is the type of annualized return over the last decade, from 2012 to 2021, which comes to 8.9%. The bottom line is that you are way ahead of inflation for that period, and as a fund manager that is your bottom line. One of them is to beat inflation and do it in the long term.

MUSA TABLE: Right, Simon. That’s a testament to how robust our strategic asset allocation is. As a long-term investor there, the intention of the board is to ensure that we keep paying benefits to our beneficiaries and pensioners, so this bodes well for us, as we know we can sustain the fund and the fund’s growth. in the long run.

SIMON BROWN: You mentioned that you did very well in the space listed below the report that came out: unlisted property dragging returns down. What percentage of your portfolio is in unlisted assets? You have, as you said, just under the value of R2.1 trillion.

MUSA TABLE: Yes. Less than 5% in total unlisted investments, so it is a small number in relation to the size of the portfolio. However, in terms of value, it is a significant figure: 5% of R2.1 trillion is a lot of money. So we saw a huge impact on the property portfolio, but that affects the entire industry.

SIMON BROWN: The property was struggling a bit before the pandemic. He’s had a really tough pandemic. We are seeing some signs of life, certainly from some of the listed real estate companies. Things are improving [we’re] not entirely out of the woods. Are you still cautious about property as an asset class for years to come?

MUSA TABLE: We remain invested in property because, as long-term investors, we believe that diversified asset allocation will ensure the fund’s sustainability. So we keep betting on him and have a positive outlook on real estate investing in general.

SIMON BROWN: We hear a lot about investment in infrastructure, particularly within Regulation 28 funds. Towards the end of last month, the minister announced more renewable energy, more than expected for next year. There is talk of ports. A lot is happening in that space. Is that a space you are investing in or looking at? Certainly, infrastructure fits perfectly into that long-term investment philosophy.

MUSA TABLE: In fact, Simon. The infrastructure fits into our long-term strategy. The GEPF has invested in bankable projects, and I emphasize ‘bankable’ because we need to guarantee the investment in the terms that will be derived from it. Therefore, we are interested in such investments consistent with our strategic asset allocation.

SIMON BROWN: You mentioned the ‘bankable’ and that is one of the benefits, especially if we look, for example, in renewable energies. You almost get reward certainty in a decade or two, usually a two-decade shelf life. You’re going to get those raises. They will adjust for inflation and give some certainty to investment management.

MUSA TABLE: Right, Simon. If so, we should. We continue to invest in renewable energy projects. We know that part of the growth of the economy is also in energy, and renewable energy is one of those focus areas for us. So we will continue to invest in them and will follow closely in the future.

SIMON BROWN: Obviously, some of your investments in JSE will be global companies. Some of them will be listed abroad and in some cases will be listed on the Johannesburg Stock Exchange. Beyond that, do you invest much beyond the borders of South Africa, perhaps in the rest of the African continent, or even more?

MUSA TABLE: Yes, we have a strategy to invest in the rest of Africa and we also have some investment options. We will continue to examine those markets again in line with our strategic asset allocation. But for now we continue to invest heavily in South Africa. We are a South African pension fund and there is always an internal bias in our investments.

SIMON BROWN: You speak of the home bias. Of course, these are government employees. The members of the fund are slightly below, but there are still more than 1.2 million members of the fund. What is important enough is that the flow to retired retirees, who are receiving their retirement benefits, is actually less than the growth of money. In other words, the fund is incredibly solvent and works as designed: to support the retirees of those who are currently working.

MUSA TABLE: Indeed. We are not concerned with the longevity of the pension fund. Our number of cases continues to be positive, able to sustain the payment of benefits. Looking ahead, our long-term funding level may be lower …… 6: 2 …… 2018, a terrible …… at 25%. We continue to monitor that, taking into account contingent reserves as well. But we are confident in the future growth of the fund and continue to play our role in the growth of the South African economy.

SIMON BROWN: That’s an important point you mentioned earlier about the unlisted ones. Your primary focus as a pension fund, of course, is on retirees. Those are the people you are most responsible to. Do you also consider that there is a kind of secondary responsibility towards the economy in general, towards South Africa in general as a country?

MUSA TABLE: In fact, Simon. This is important. As I indicated, we have a bias when it comes to investing in South Africa Incorporated. So we see it as a secondary focus area after taking care of our members, retirees and beneficiaries. So we will continue to invest in South Africa to make Africa work. The fund will also continue to prosper.

SIMON BROWN: We will leave that there. That’s Musa Mabesa, Senior Executive Director of the Government Employees Pension Fund. Results, as I said, until the end of March. The annualized key number for the last decade is 8.9%. Musa, we really appreciate the time tonight.

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