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Debswana Pension Fund expansion quest bares fruits

Publishing Date : 21 May, 2018


Botswana’s second largest and the country’s best Private sector Fund Debswana Pension Fund (DPF) continues t grow with its total asset now sitting at over 7 billion pula.

 Recent report on the Fund’s 12 month performance ended December 2017 on its investment portfolio shows a modest outcome. According to the Fund’s E-Brief released recently the fund’s financial figures reflects a much improved performance relative to the 2016 year end.
For the period under review the top performing sector was Global Emerging Markets Equities, posting a return of 26.3 percent. The next top performing asset class was Global Equities, posting a return of 12.6 percent for the period, as measured by the MSCI Word (BWP).

For the Fund, Global Equities were up 16.8 percent for the period, outperforming the benchmark by 4.2 percent. Orbis was the top performer in this space, posting a net return of 19.2 percent for the 12 months to December, outperforming the benchmark by 6.6 percent. “All global equities managers in the Fund outperformed the benchmark net of fees” states the report. The fund was established in 1984, and its housing and expanding retirement dues for one the world’s largest diamond companies and Botswana’s largest private sector employer Debswana.

 DPF says its worst performing asset class was Local Equities, posting a return of -5.8 percent for 12 months to December 2017 while Global Bonds returned -0.5 percent over the 12 months to December 2017. PIMCO outperformed the benchmark by 1.47% DPF also note in the brief report that taking into account its history the Fund’s approach towards local asset manager mandates has been to award balanced or generalized mandates, however given the growing DPF asset base, the DPF Board of Trustees has since found it prudent to change from that tradition and re-issue specialist mandates for the local market going forward.

“This is mainly for the purpose of ensuring focused and optimal performance by the local managers. A request for proposals was issued in 2016 and the new specialist manager appointments were finalized in Q1 of 2017 as follows” reads the report. The Fund also reports that as part of the ongoing implementation of the Fund’s investment policy and manager service level agreements, the DPF Board of Trustees resolved in the Board sittings of Q2 and Q4 2017 to disinvest from Aberdeen and Kgori Capital respectively.

The Debswana Pension Fund prides itself with a sparkling investment performance history. Prior to the year 2004, the DPF investment strategy was based on a smoothed return process. Through this strategy, members were awarded investment return bonuses equally across the board based on market performance subsequent to bonus declarations.  In the 6 years up to 2003, the Fund was fortunate enough to earn record returns well above inflation.  

The market downturn of 2001/2002 however brought about new lessons for the Fund. Near retirees were hardest hit by the -12.13% loss on their fund credits, hence therefore leaving the immediate retirees with reduced pension savings in that year by the Trustees. Following from that experience the DPF Board of Trustees reviewed and identified the Life Stage Investment Model as the best way to mitigate and minimize future potential losses for vulnerable members.

The general principle of the life stage model is to invest member funds based on their presumed risk appetite. Capital preservation for near retirees is therefore pursued through reduced exposure of their assets to high risk investment instruments.  Conversely, Members far from retirement are invested aggressively in high risk-high yield vehicles. Under life staging, member assets are split into three portfolios that have different investment objectives. Market portfolio (18-53) Conservative Portfolio (age 57-60) and a Pensioner Portfolio (above 60). The Life stage investment model was affected in 2004.

In 2014, DPF revised its investment strategy to increase domestic property investment exposure to 12.5% of assets over the next 3 years while also developing a strategy to take advantage of local and African investment opportunities. The DPF in its quest to fulfill its investment strategy and according figures and financial performance the Gosego January led fund is on the right track.



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