PIC assets under management grows by 8,9%, surpasses R2.5 trillion
The Public Investment Corporation (PIC) has recorded growth of in its assets under management (AuM) to R2.548 trillion. This means that the PIC AuM has grown by R 208 billion (8,9%) from R2.339 trillion the previous financial year. The PIC, which manages funds on behalf of public sector entities, yesterday tabled its integrated annual report for the 2021/22 financial year.
Commenting on the growth, PIC Chief Executive Officer, Abel Sithole said, “the PIC’s growth and performance is grounded in a disciplined investment approach focused on delivering positive, riskadjusted returns to client portfolios over their desired time horizon”. The growth has been achieved despite external challenges in the operating environment, with listed equities, which is PIC’s major asset class by percentage, delivering positive returns and contributing R1.227 billion to the entire portfolio.”
The PIC’s portfolio is made up of the following assets: Listed Investments (86,78%), comprising listed equities, bonds, cash and money markets and listed properties; Unlisted Investments (4,57%), which is made up of private equity, impact investing and unlisted properties; and Offshore and Rest of Africa Investments (8,69%), made up of global listed equities, global listed bonds, Africa-listed investments and Africa-unlisted investments.
The portfolio endured the effects of COVID-19, and a relatively tough economic environment, more intensely in the year under review, than in the previous financial year, and this is reflected in the decreased portfolio value. Investee companies were supported throughout the pandemic, with payment holidays, extension of loan tenures and waivers of covenant breaches. Limited capital injections were offered to some companies. These interventions are made on merit and on a case by case basis.
The portfolio value decreased by 7.79% to R75.15 billion due to impairments raised during the financial year. Disbursements for the year decreased by 60.52% to R2.25 billion compared to the previous year. Moreover, the PIC made fewer unlisted investments during the year under review compared to the previous financial year.
This was because the unlisted investment mandate with the Government Employees Pension Fund (GEPF) was under review. The revised mandate was signed at the end of the financial year, with the GEPF committing R25 billion. The committed amount will be deployed over the next five (5) years in both South Africa and the rest of Africa.
The target of developmental investments for South African is between R300 million and R500 million per entity although attractive investments starting at R100 million will be considered per entity. The Rest of Africa developmental investment portfolio shall mainly comprise of investments between USD20 million and USD40 million.
Performance of the property market is correlated to domestic GDP growth. During the year under review, the macroeconomic environment was already subdued before global the COVID-19 pandemic. The PIC’s property portfolio is now valued at R52.62 billion. It is made up of directly- and indirectly held property investments in South Africa and rest-of Africa, with some notable investments in such companies as Pareto, the V&A Waterfront and Gateway Real Estate Africa.
Given its developmental mandate, the PIC, on behalf of its clients, has invested alongside other property developers to roll out 10 000 beds for student accommodation.At 31 March 2022, the portfolio had 1 579 student accommodation beds under its management.
The PIC continued to implement short-to-medium term property asset management interventions, which include portfolio optimization; disposal of strategically misaligned property assets; reposition of existing assets through redevelopment and refurbishment where possible; pursuit of alternative and emerging sectors; alignment to the benchmark in sector exposure to increase correlations between portfolio and benchmark performance; acquisitions to focus on high-quality income streams that can be sustained into the future (strategic property locations, strong lease terms and transactional covenants); increasing strategic investment into real estate funds across the continent to ensure adequate market exposure and best-in-class partnerships; and creation of capacity for unserviced nodes and new market entrants.
The permanent Board was appointed in November 2021 by the cabinet to replace the interim Board whose term came to an end at the end of October 2021 in line with the amended PIC Act. The Board continues to restore and lead the organisation forward. Implementation of Mpati Commission recommendations continues to be a priority for the Board.
By year-end, 70% of recommendations had been implemented and signed off. The remaining 30% comprised matters still under investigation by, or having been referred to law enforcement agencies and, in some instances, due for implementation by third parties. Valuable lessons have been learnt from the control weaknesses that occurred and work continues to strengthen governance and management processes.
The Board has put measures to independently verify management’s implementation of outstanding Mpati Commission recommendations.
During 2022/23, implementing the remainder of the Mpati Commission recommendations will continue. Focus will also be placed on implementing the approved investment strategy, deploy the new unlisted mandate to further diversify and grow AuM.