The Debswana Pension Fund (DPF)- which manages assets in excess of P5.6 billion- has indicated its commitment to increase portfolios, BG Business has learnt. Currently, 42 percent of the DPF assets approximately P2.3 billion are invested locally across different asset classes.
DPF’s Communications Manager, Agatha Sejoe told BG Business this week that the Fund’s medium to long term investment objectives are that for private equity in particular, “The DPF aims to increase its exposure from the current 1 percent to 7.5 percent over the medium term.” The Fund plans to increase its local property footprint from the current 5 percent to 12.5 percent, also in the medium term. There will be an increased focus on local and African investment opportunities going forward, she said. Sejoe added that, the Fund is currently on the eve of implementing an Asset Liability Management Framework that will enable a more robust investment strategy framework. Over the long term, the Fund also aims to implement a local emerging managers’ support programme, she said. Recently at a pension fund seminar held in Phakalane, DPF Chairman, Richard Vaka revealed that through a robust well diversified investment strategy both local and international assets, the DPF has managed to deliver strong risk adjusted returns over the last 10 years.
From 2012 for instance, DPF’s onshore returns were at 18 percent, 17 percent in 2013, 12 percent in 2014 and a slight 2 percent in early 2015; whilst the offshore returns in 2012 reached 22 percent and reached a high of 37 percent in 2013, then 10 percent in 2014 and 2 percent in early 2015. At the backdrop of its diversification strategy and considering the local economic participation, DPF which had intended to buy a 10 percent stake from Puma Energy Botswana earlier this year, has since made a U-turn on the deal.
Nonetheless, Sejoe pointed out that DPF shall continue to actively engage and consider similar partnerships going forward in an endeavour to generate meaningful returns for the benefit of the members. On the background of available investment opportunities that DPF could take advantage of; although private equity in Botswana is still at its infancy, the market opportunities are estimated to be approximately P5billion.
The total fixed income market is approximately P10 billion with P9 billion of listed markets and P1 billion of unlisted markets. In the property segment, listed property investment market is estimated at P4.5billion dominated by investments in commercial and retail properties. Unlisted opportunities are estimated to be approximately P10-15 billion, particularly in retail, commercial, residential, industrial and leisure property. Vaka is of the view that infrastructure projects will create investment opportunities going forward, although with challenges around availability and prices of land and servicing land. He however emphasised that portfolio diversification is one of the most fundamental and important principles of modern investments.
“Diversification strategies that include investment in international assets allow access to a wider range of assets classes, financial instruments and industries that are not established in the local markets. Construction of a well diversified portfolio of low correlated international and local assets is needed as it has both the effect of increased total returns and decreased volatility,” he advised. With over 11,500 participating members including pensioners, active and deferred members, the DPF is the second largest in the country with key investments in property, equity, bonds and short-term deposits.