The GEPF can now invest 15% of its assets offshore, but there’s no rush – News24

The GEPF concluded negotiations about the geographic allocation of its assets in October 2020. The revised allocation for offshore investments has moved from a maximum of 10% to 15%.

The Government Employees' Pension Fund (GEPF) says it has received the green light to invest up to 15% of its assets offshore. The pension fund for civil servants had been negotiating with Treasury about allocating more of its money offshore since the days of Public Investment Corporation (PIC) CEO Abel Sithole when he was still its CEO.

The GEPF could only invest 10% of its more than R2 trillion-strong assets outside SA.

During the presentation of the group's 2021 integrated report and financial statements on Thursday, GEPF CEO Musa Mabesa said the GEPF concluded negotiations with the finance minister about the geographic allocation of its assets in October last year.

"The revised allocation for offshore investments has moved from a maximum of 10% of the total [assets under management] to up to 15%," said Mabena.

He said it was desirable that there's no big movement in the percentage of assets the GEPF can invest offshore. The fund wouldn't want "a big-bang approach" on this.

"You'll appreciate that if we were to move the bulk of our investments outside of South Africa, it would have a devastating impact on the economy itself because of the sheer size of the GEPF," said Mabena.

However, the fund has not even reached the 10% allocation. The pension fund is still reviewing some of its investment mandates with the PIC, which will likely change its offshore asset allocation in future.

"The coincidence of us reviewing the mandate together with a revision of where we want to invest allows us to work on those two simultaneously. And then once we are ready to implement, that [offshore allocation] will start showing in future annual reports," said Mabena.

But he emphasised that, given the size of the GEPF, it will "sensitively" manage future offshore allocations. First, it has to get to the 10% offshore allocation that was always allowed and then take it from there. But he said the home bias towards SA has worked in the GEPF's favour in the year ended in March.

Thanks to favourable market movements in the 12 months to 31 March, the GEPF's assets reached R2 trillion for the first time in the first quarter of 2021. The fund's value increased by 27.5% compared to what it reported at the end of March 2020.

The fund said the yearly returns for international portfolios were very high in US dollar terms. But a stronger rand moderated these returns to 28.5% for equities and minus 5.11% for bonds in rand terms. In comparison, the GEPF equity and bond portfolios in SA returned 48.49% and 15.83%, respectively.

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The GEPF can now invest 15% of its assets offshore, but there's no rush - News24