South Africa Government Pension Returns 2.6% in Fiscal 2019

Robust returns from commodities help $122.9 billion fund beat benchmark.

South Africa’s Government Employees Pension Fund (GEPF) returned 2.6% during the fiscal year ended March 31, down from 8.5% in 2018, but beating its benchmark of 2.3%. That brought its asset value to R1.82 trillion ($122.9 billion), an increase of R17 billion compared to the previous year.  

The fund attributed the outperformance of its benchmark to improved resource commodity prices, which it said favored the fund’s tactical overweight position in resources relative to the benchmark. The basic materials sector of the Johannesburg Securities Exchange (JSE) returned a robust 41% over the 12 months to March 31.

The GEPF said its portfolio has generated “healthy long-term returns” that are in line with its investment strategy and reported five- and 10-year annualized returns of 7.0% and 11.6% respectively as of the end of March. It said the returns were mainly driven by local equity and bond market returns.

The asset allocation of the fund is 50% in domestic equity, 33% in domestic bonds 5% in foreign equity, 5% in domestic property, 4% in cash and money markets, 2% in “Africa,” and 1% in foreign bonds.

Domestic cash was the fund’s top performing asset class returning 7.26% for the year ended March. 31, compared with 7.41% at the same time last year.  Domestic bonds, which returned 3.45%, was next, compared with 16.18% last year. Domestic equities gained a meager 0.43%, compared with a 9.41% return in 2018, while domestic listed property lost 5.68%, after losing 7.09% last year.

“The performance of domestic equities and bonds, which constitute 80% of the fund’s assets, remained sluggish,” said the GEPF in its annual report. “Major domestic asset classes remained under pressure, reflecting lower business confidence in the local market, in line with the weaker domestic economy.”

The local equity benchmark declined to 0.4% as of the end of March from an annual return of 9.4% in 2018, while the local All Bond Index annual return fell to 3.5% from 16.1% in fiscal 2018.

“The financial results once again highlight that the performance of the fund is not isolated from the country’s economic and development constraints,” said the GEPF in a release. “If the GEPF is to address this dependence, it has to consider further diversification including increasing its off-shore investments.”

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