BPOPF Introduces Lesser Risks Portfolio

Portfolio created to allow members to reduce risks Members encouraged to switch to portfolio at age 40 Portfolio has lower risks and returns The Botswana Public Officers Pension Fund (BPOPF) is in the process of introducing a new portfolio known as the Moderate Growth Portfolio (MGP), although the name might actually change before its formal launch by October next year. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] According to the Fund’s Chief Investment Officer, Tshephang Loeto, the portfolio is a low-risk strategy designed to limit the downside risk while capturing some upside when markets do well. “When we launch the product, we will encourage members of a certain profile to switch to this product,” said Loeto, adding that the MGP was created to allow members to reduce risk as they near retirement while also maintaining good returns. “After recent market performances, we have come to appreciate that things are not always without turbulence in the investment field,” he told journalists at a press conference in Gaborone in December last year. Because it is associated with low risks compared to the Active Member Portfolio, Loeto noted that the returns are also low for the MGP. “But it is not as low as the Pre-Retirement Switch in terms of the risks and the returns,” he added. He emphasised that the best advice that BPOPF can give to any member who has attained the age of 40 is to consider switching to the MGP. “We are saying 40 years because the early retirement in our Fund is 45,” Loeto explained, pointing out that the switch should be done five years before retirement. He presented the product as complementing the two that are currently in place – the Active Member Portfolio and the Pre-Retirement Switch. “This affords a member an opportunity not to miss a step as they move towards their retirement time,” he said. However, the move to the new product will be optional. “In investment language, it is called de-risking because a member would have taken a lot of risks when they got into the pension fund,” Loeto said. “With time they get older, they are able to take the same amount of risks that they were able to take.” The MGP will be offered once a year but a member who takes it will not be allowed to switch back. “Once you have reduced your risks, you cannot go back and increase them,” Loeto emphasised. “The assumption here is that you are preparing for retirement.” Significantly, he noted that although it is expected that this portfolio will have lower returns than the Active Portfolio over the long term, it should also reflect less volatility due to its lower exposure to equities. [/ihc-hide-content]

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