New Retirement Funds Act to impact AUM – BPOPF

Assets under management likely to decline BPOPF’s members’ age diversity to cushion impact CEO: “We exist to create wealth for members” While a provision for an increase in encashment options will come to the rescue of pension fund members in a time of need, it will have a negative impact on Assets Under Management (AUM) negatively held by pension funds Responding to the Business Weekly & Review questions at a media briefing in Gaborone yesterday, the Chief investment Officer of Botswana Public Officers Pension Fund (BPOPF), Tshephang Loeto, said this is because the funds will be flowing out. “[ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] But there is a cushion that is brought in by the age diversity of our members,” Loeto noted. “They are not all retiring at the same time. It is likely that with the profile of our members, we will feel a slightly negative impact over the long-term.” He pointed out that BPOPF has P87 billion in AUM and a majority of members not yet at the retirement age, except those who may opt for early retirement. “So there will be a big hit at a go but overall the impact is expected to be negative,” Loeto explained. However, the CEO of BPOPF, Moemedi Malindah, said the matter should also be looked at from the perspective of the Fund’s existence. “BPOPF exists to create wealth for members,” he said. “If a member can cash, and the policy was structured such that it benefits that member, it is a good thing.” Malindah emphasised that the policy was made for members to encash and carry out certain activities. “If member is able to pay off their mortgage, for example, it means it is a good thing,” he said. “It is not all about people encashing. We have to look at what they are going to do with that money.” Increase in onshore investments The Fund’s Chief Investment Officer, Loeto, pointed out that the legally-sanctioned increase in the share of funds allocated for onshore investment from 30 percent to 50 percent is coming at a time when BPOPF was already heading in that direction. “For a couple of years now, pension funds in the market, including ours, have generally been at around 60 percent offshore and 40 percent onshore,” he said. He added that the development is indicative of an opportunity for local pension funds to utilise. “There are a lot of critics around this move but we are not necessarily of that tone,” said Loeto. “For our pension fund, there are a number of projects that we have been working on. This includes our incubation programmes which have gone out to tender and to look for certain managers and capital towards management of those assets.” According to Loeto, for BPOPF, the repatriation of these funds was only a matter of time before it happened because the BPOPF was already moving in that direction. “Because we have been at 60 percent as an industry, it basically means only 10 percent is being brought back,” he pointed out. “The other 10 percent of the required 20 percent has been onshore already. “If you put this alongside the fact that the banking sector for the longest time has been crying for liquidity, the additional 10 percent that is coming will be deployed to fund opportunities financed by the banks.” As the repatriation of these funds unfolds, Loeto said the industry could temporarily experience muted returns as the pension funds look where to deploy those funds. “But in the long-term, it is expected that it will benefit the country, and the members and those returns will be able to go to what we would consider as normalised type of returns,” said Loeto. [/ihc-hide-content]

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New Retirement Funds Act to impact AUM – BPOPF

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