1 click to edit master subtitle style presentation to standing committee on finance 23 november 2010
TRANSCRIPT
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Click to edit Master subtitle style
PRESENTATION TO STANDING COMMITTEE ON FINANCE
23 NOVEMBER 2010
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PIC ATTENDEES
Non – Executive Board Members
Mr. Nhlanhla Nene ChairmanMr. Jan Strydom Chairman: Investment Committee Mr. Zakhele Sithole Chairman: HR & Remuneration Committee
Management
Dr. Daniel Matjila Acting CEO, PICMs. Albertinah Kekana COO, PICMs Kameshni Naidoo CFO
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CONTENT
Organisational Overview Review of performance of PIC Operations
Review of performance of Assets Under Management (AUM)
Growth in Assets Under Management
Investment Highlights of the year
Investment Performance
Socio-economic Impact of PIC Investments
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Vision, Mission, and Values
PIC successfully streamlined the Vision, Mission, and Values Vision:
To meet or exceed our clients' investment objectives and commitments to stakeholders Mission Statement:
The PIC – having been established as an Act of Parliament to provide for the investment by the Corporation of certain monies received or held by, for or on behalf of the Government of the Republic and certain bodies, councils, fund and accounts – will:
− Deliver investment returns in line with client mandates− Create a working environment that will ensure that the best skills are attracted and retained− Be a beacon of good corporate governance− Contribute positively to South Africa’s development
Values: We have integrity We are results driven We care for our people We are accountable We strive for financial sustainability
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PIC Structure
PIC is an investment management company focussing on public sector entities
PIC is registered with the Financial Services Board (FSB)
Its investments are governed through client mandates
In 2011 PIC will be 100 years
Government
Public Investment Corporation (PIC)
PIC Real Estate Asset Management (PIC REAM)
Division of the PIC
Harith Fund Managers an associate of the PIC (46% owned)
(Fund Manager for PAIDF)
Advent Asset Managers
(Discontinued into
PIC REAM)
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PIC Governance Structure
Board
PIC REAM Committee
Executive Committee
Audit and Risk Committee
Human Resources and Remuneration
Committee
Chief Executive Officer
Information Management
Steering Committee
Portfolio Management Committee
Investment Committee
Executive Investment Committee
Valuations Committee
TERMS
OF REFERENCE
Management Committee
DELEGATION
OF AUTHORITY
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Overview of PIC clients
PIC’s clients are 36 public sector pension, provident, social security, development and guardian funds in South Africa.
Collectively, the assets under PIC management as at 31 March 2010 were R910,9 billion.
GEPF is PIC’s largest client and as at 31 March 2010 had entrusted assets worth R819 billion to the Corporation.
TOP FIVE PORTFOLIOs AUM (%)
GOVERNMENT EMPOYEES PENSION FUND (GEPF) 90
UNEMPOYMENT INSURANCE FUND (UIF) 5
COMPENSATION COMMISSIONER: PENSION FUND (CC:PF) 1
COMPENSATION COMMISSIONER (CC) 1
ASSOCIATED INSTITUTIONS PENSION FUND (AIPF) 1
OTHER 2
TOTAL 100
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Growth in Assets Under Management (AUM) (R Bn)
Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10
221 253 293 308 377 461 598 719 786 739 910
0
2
4
6
8
10
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Assets under management increased by 23% from R739 billion to R910 billion
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Growth in Assets Under Management
31 March 2009 31 March 2010 YoY CHANGE
Asset Class R' bn AUM (%) R' bn AUM (%) R' bn AUM (%)
CAPITAL MARKET 270.5 37 329.3 36 58.8 7.95
EQUITY 289.9 39 436.7 48 146.8 19.85
MONEY MARKET 101.2 14 70 8 -31.2 -4.22
STRUCTUREDPRODUCTS 7.3 1 29.2 3 21.9 2.96
ISIBAYA 31.0 4 5.9 1 -25.1 -3.39
CASH 16.6 2 12.9 1 -3.7 -0.50
PROPERTY 23.4 3 26.9 3 3.5 0.47
TOTAL 739.7 100 910.9 100 171.2 23.14
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Operations Highlights for the year
Building Institutional Capacity
Focus on improving Investment Performance
Socio-Economic Impact
Implemented a revised organisational structureConsolidation of financial risk, operational risk and regulatory
compliance for seamless risk management Implementation of a comprehensive skills development planEnhanced graduate programmeOperational efficiencies from implementation of Fixed Income
Investment Management System
Consolidation of all properties businesses into one division Operational efficiency and better focus on investment
performanceRestructuring of Equities portfolio for better investment
performance
Revised Isibaya Fund strategy to align withDevelopmental Investment Strategy of the GEPFResponsible Investing Principles
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Financial Sustainability
Revenue No increase in fees charged to clientsFees below industry levelsDisposal of 54% of HarithOperating Expenses21%(35) increase in employee head count Net profit after tax amounted to R72 million (2009: R158 million), 55% lower
than in the previous periodDividend of R86 million (Excluding STC) paid to the shareholderNet profit expected to decline as PIC builds up its operations
Consolidated 2010 Consolidated 2009 Change Year On Year (%)
Revenue R310 million R390 million (20)
Operating Expenses R229 million R211 million 9
Net profit after tax R 72 million R158 million (55)
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Investments Highlights for the year
EQUITIES
PROPERTIES
ISIBAYA FUND
Equity portfolio increased by 62% from R270 billion to R437 billion
Core – Satellite investment strategy implemented resulting in 75% of funds managed internally and 25% managed externally by 16 asset managers
Property portfolio increased by 15% in value from R23,4 billion to R26,9 billion
Community Property Fund (CPF) was ranked #1 on an income return (10.6%) out of 21 funds in the Investment Property Databank survey for 2009
R740 million invested in Bridge City mall in KwaMashu
Unwind of MTN BEE transaction has yielded a R14 billion profit for GEPF and resulted in 3200 MTN’s BEE employees becoming shareholders of MTN
Black owned private equity fund manager commitments of R575 million
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Summary Fund Performance
The performance of the total Assets Under Management has provided a positive real return albeit the performance of the GEPF was below benchmark
SUMMARY Fund (%)
Benchmark (%)
Excess Returns (%)
GOVERNMENT EMPLOYEES PENSION FUND (GEPF) 23.41 26.83 -2.70
UNEMPLOYMENT INSURANCE FUND (UIF) 9.57 8.59 0.98
COMPENSATION COMMISSIONER: (CC) 9.49 8.81 0.68
COMPENSATION COMMISSIONER:PENSION FUND (CC:PF) 8.78 7.86 0.92
ASSOCIATED INSTITUTIONS PENSION FUND (AIPF) 9.38 8.79 0.59
12 Months Ending 31 March 2010
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Fund Performance GEPF Attribution
EQUITIES
The performance of the listed equities dropped from the previous year’s performance due to market movements as well as strategic buying up of equities over the period and consequently the composite portfolio underperformed the SWIX benchmark
Internally Managed tracker funds have underperformed the benchmark
The new Externally managed equity composite has outperformed the benchmark
PROPERTY
The conservative capitalization rate used in comparison with IPD
Concentration in high-grade properties which does not match the IPD property mix
The overweight position in the largest and most liquid listed stocks (GrowthPoint and SA Corporate)
ISIBAYA FUND
Isibaya Fund returned an IRR of 25% since inception, outperforming its benchmark by 11%
The R6 billion investment in AfriSam was materially impaired at R1.2 billion
Deterioration of market conditions affecting companies in the cement industry and the high gearing contributed to the impairment
PIC is actively managing the investment to protect and enhance value for the benefit of the GEPF
FIXED INCOME
This portfolio has outperformed across all the sub classes.
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Socio-economic Impact of PIC Investments [1]
Fixed Income RSA Government Debt
- R169.4 billion is invested through various forms of government debt- Supports government spending on its priorities
Municipalities- R2.6 billion invested directly and indirectly to municipalities (Cape Town Metro, Joburg Metro, and
INCA) supporting local infrastructure development and service delivery SOE Debt & Equity
- R97.3 billion is invested in SOE Bonds & Money Markets to support the building of the infrastructure necessary for development
- In addition to ACSA Bonds, R2.4 billion invested in ACSA equity- R2 billion to IDC from UIF funds for initiatives aimed at addressing impact of Global Recession
R3 billion supports African infrastructure development via AfDB bonds Equities
Driving Responsible Investment: GEPF & PIC play an active part in SA Network of the UNPRI ESG rating matrix finalised to include social and environmental issues R8 billion allocated to BEE asset managers
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Socio-economic Impact of PIC Investments [2]
Isibaya Fund focusing on implementing the GEPF developmental investment policy framework.
GEPF policy is aligned with the priorities set out in the MTSF and the IPAP
Allocation of 5% of GEPF AUM (R40 bn)
Economic Infrastructure
Social Infrastructure Environmental Sustainability
Job Creation & New Enterprise
Energy
Logistics Network
Water
Commuter Transport
Liquid Fuels
Broadband
Affordable Housing
Healthcare
Education
Renewable energy
Green buildings
Energy Efficiency
Recycling
Clean Technology
SMMEs
Small cap stock Exchanges
High Job Creation Section
BBBEE
Allocation: R20 bnPercentage: 50%
Allocation: R12 bnPercentage: 30%
Allocation: R4 bnPercentage: 10%
Allocation: R4 bnPercentage: 10%
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Name Sector Description Approved Amount (Rm)
Eduloan Educational Loans Education finance for tertiary education
130
TUHF Affordable Housing - Refurbished inner city buildings
Short and medium term finance to residential property entrepreneurs
317
BPCC Road infrastructure Toll road financing 400
Spartan Technology IT hardware and Software leasing to SMEs
Providing high-end technology rental solutions
48
South African Workforce Housing Fund
Affordable Housing Affordable housing 150
Old-Mutual Housing Impact Fund
Affordable Housing Housing units 1,000
Total 2,045
Isibaya Fund Approved Investments
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The Community Property Fund
Performance Highlights:#1 IPD Income Return – 2009 (10.6%)
Top Decile for Targeted Development Investments – (Alexander Forbes – Manager Watch)
CPF FACTS
Properties owned 27
Properties Developed 32 (5 sold)
Property Value R2.8bn
Other Holdings R0.5bn
GLA Value
Eastern Cape 7%
123,716,836
Western Cape 1%
25,350,000
Gauteng 38% 1,082,102,672
North West 17%
243,200,000
Mpumalanga 15%
290,338,654
Limpopo 9%
267,864,832
KwaZulu Natal 11%
748,203,234
Free State 2%
49,800,000
2,830,576,228
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Socio-Economic Impact
Created direct employment to date >11,000 people
Affected more than 57,000 people indirectly Based on simple multiplier – not inclusive of all downstream
activities
Developed local entrepreneurs Local cleaning, security, refuse suppliers Franchise outlets
Provided infrastructure to under-serviced areas Formalised bus/taxi commuter facilities
Created catalysts for other infrastructure development Nodal activity – create commuter critical mass enabling better
government service provision
Created Community Trust Funds Funding for: creches, old age homes, HIV prevention education
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Example of Social Impact: Bridge City
Our Role
Planning Phase: Facilitated acquisition of site Acquired retail development prior to construction to
facilitate commercial funding
Construction Phase: R650m direct construction spend R160m channeled to local contractors 4 000 people employed during construction
Developed Site: 20% retained for black empowerment group 10% retained for the BBBEE group Approximately 800 permanent jobs Catalyst for:
- New railway station by PRASA (R450m)- 450-bed Provincial Hospital- Regional Magistrates Court- Further retail and commercial opportunities in
precinct
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Harith Fund Managers and PAIDF
PAIDF was the winner of the Infrastructure Fund of the Year for the second year in a row Over 70% of PAIDF funds will be committed by the end of the Mar 2011
Investment Country Description Approved Amt (US$ m)
Seawolf Nigeria Oil & Gas: Nigerian sponsored company for the purpose of acquiring 3 jackup shallow water drilling oil rigs and provide oil drilling services to oil and gas producers in West Africa
24.0
Aldwych Kenya, South Africa, Zambia and Ghana
Energy: Independent power producer 22.8
ETKHL Kenya Telecoms: Essar Telecom Kenya Holdings Limited (ETKHL) trading as “Yu” is one of 4 GSM wireless telecommunications providers in Kenya
93.8
Main One Ghana, Nigeria and West Coast Region
Telecoms: Company finances, constructs and operates state of the art sub-sea broad band cable system
31.7
New GX South Africa and Sub-Saharan Africa
Power & Telecommunications: Installation, maintenance and operation of sub-terrain ducting infrastructure capable of dark fiber optic network services
37.2
TAV Tunis Tunisia Aviation: TAV Tunis was established to design, finance, construct, upgrade, own and operate 2 airports in Tunisia. Namely, an existing airport, Monastir and built a new Enfidha airport.
53.4
Total 263.8
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THANK YOU