The time is long overdue to merge the Public Investment Corporation with the Government Employees Pension Fund . When I once wrote a centenary survey on the PIC nobody could decide who should speak on investments, so I had a joint interview with Dan Matjila from the PIC and John Oliphant from the GEPF. It was clear that Oliphant’s function was confined to the role of asset and liability matching — as well as his Billy Graham-style crusade for responsible investing.
Why do we need separate boards of trustees both funded by the taxpayer when one will do? It is also time that the guarantee for GEPF members disappeared. This enables it to be one of the last defined benefit funds in the country. Civil servants know what pension they are going to get based on their final salary and length of service, courtesy of the taxpayer. The rest of us depend on the growth we can get from the financial markets.
When the PIC steps outside the listed space it has rarely been a success. Just 45% of its unlisted assets in the Isibaya fund are performing. There is an internal rate of return of just 1.87%, compared with a target of 8%. Under the CalPers model this portfolio would have been moved to another subadviser years ago. Even if it had been run in-house they would have had the maturity to raise the white flag.
The PIC boasts that the returns for the GEPF were in line with expectations while smaller clients such as the Unemployment Insurance Fund and Compensation Commission were ahead. As a GEPF member would I be happy to see more effort being put into the smaller portfolios? Over the long term the GEPF should consider terminating its mandate with the PIC and investing in index funds. Over 10 years its return of 7.59% is a paltry 0.09% ahead of the benchmark.
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