The Botswana Public Officers Pension Fund (BPOPF) this week cheered the market with the unveiling of its Alternative Investment Policy that will also come with the inflow of specialist asset managers.
The new development also has a citizen element in that most of the service providers will be compelled to have more than 25 percent of equity held by citizens.
The managers of BPOPF told Sunday Standard on Friday the project pipeline should mainly be in Botswana as a way of promoting the local economy.
Chief Executive Officer of the fund, Ephraim Letebele, said the policy will ‘create traction’ in the market that has been criticised for taking 70 percent of pension fund’s money offshore and keeping 30 percent locally.
“We wanted to open up and also to deal with specialist asset managers,” Letebele said.
The fund, at inception in 2001, was mainly focused on the global balanced mandates, but the new policy is aimed at exposing the multi-billion Pula fund to alternative asset classes.
The approach of the new policy is to use BPOPF money on hedge funds, property investments, infrastructure and private equity.
The fund will soon issue a tender in which it will invite bidders with specialist investment management skills to manage new asset classes.
Key reward of the policy will be the inflow of private equity firms and the development of the fledging sector. This will excite, VPV, a local firm that manages, amongst others, the 10-year P200 million CEDA VCF.
BPOPF said the programme will aim to gain exposure to 5- 10 property funds and the limit of exposure to 20 percent of asset value.
Already, the fund has exposure in property business, including the Letsema Office Park and investment in office block at Kgale Hill.
Clair Mathe, General Manager and Investment Management at the fund, said the aim is to get a return of 5 percent above inflation on its investment in property in a bid to safeguard the purchasing power of members.
Equally, the rollout of private equity will focus on private equity funds and strong bias will be towards Botswana focused funds and investments will be split into an investment of between P100 million and P350 million every two to three years.
Just like property, the fund is eyeing a long term return of 5 percent more of what the fund could get on the local stock market and derive value for the members.
Mathe added that the programme will also aim to get exposure to 2- 5 infrastructure funds in a bid to catch construction train through Public, Private Partnerships (PPPs). Like the others, BPOPF will have bias towards Botswana as the aim is to keep the money in the domestic economy.
She added that the Alternative Investment Policy will have a wider ranging impact on the economy in terms of job creation, grow the asset management industry, skills to transfer and citizen participation.
Letebele added that every service provider should show the will to transfer skills and Information Technology to citizens.
He added that more than 25 percent equity should be held in Botswana in any form or other. However, this will not be good news for many private equity companies from across the borders that want to stunt the growth of the local money market.
Currently, Botswana, unlike South Africa, has no legal framework for Citizen Economic Empowerment.
“If implemented right, it can help the local capital markets,” Mathe said, referring to the benefits it will bring if private equity firms divest and allow local market to attract local investors.
Although the private equity industry will grow, Letebele warned that they will be subject to due diligence after the tender has been put up.
BPOPF said service providers will be given time to strategise, adding that existing ones could be given space to set up private equities.
If everything comes into shape, the rollout of the programme should be before the end of calendar year 2011.
The move also comes at a time when the regulator NBFIRA is working on changing the rules of the game to allow funds to ‘be repatriated home’.
Current Pension Regulation dictates that fund managers can invest a maximum of 70 percent offshore, and 30 percent within the country.
On the other hand, the local pension fund is worth an estimated P36 billion, while the DCI has a market capitalisation of P29.9 billion, with a free float of only P12.5 billion in the market, which the pension funds have access to.
The new regulation will see the asset allocation move to 40 percent for Botswana and 60 percent for foreign investment by 2015, and challenges for the industry may grow.
The fund’s membership by March 31 2010 was 99, 940 active and deferred members and 5, 470 pensioners.