The PIC is the largest institutional investor in South African listed equities, controlling over 10% of the market capitalisation of the Johannesburg Stock Exchange (JSE).
Approximately 80% of the listed equities portfolio is managed internally on an enhanced index or ‘passive’ basis, which allows the clients to benefit from the significant saving in management fees, without compromising on performance. External managers manage the remaining 20% of the portfolio, presenting the opportunity to focus on active asset management, to maximise returns for clients.
Our investment mandate prescribes that up to 10% of its AuM can be invested outside of South Africa. Five percent of this is invested in offshore equities and the remainder in the rest of the Africa continent, excluding South Africa.
The Public Investment Corporation (PIC) is a member of the Johannesburg Stock Exchange (JSE), and only concludes transactions with fellow JSE members. The Fixed Income division manages both short-term investments of up to one year (Money Market), as well as longer-term investments (Capital Market).
Fixed Income instruments are issued by an entity, which may be Government, a corporate or a parastatal who wish to raise capital, for a specific period of time, for which they pay a fixed rate of return over the lifetime of the investment. The internally managed domestic fixed income activities are managed and traded by the Fixed Income team. The team enters into transactions which are in-line with a clients’ mandate.In terms of the Capital Market investments, PIC is authorised to invest in listed debt issued by the South African Government, parastatals, corporate entities and securitisation vehicles. The scope and extent of the investment are dependent on the issuers’ national credit rating. The capital market benchmarks used are the All Bond Index (ALBI) and the Composite Inflation-Linked Index (CILI). The Fixed Income division aims to outperform the indices on our clients’ behalf.Money Market Investments are mainly concluded with the larger domestic banks, in addition to larger corporates, parastatals, securitization vehicles and smaller banks. This is dependent on the issuers’ national credit rating and their overall credibility. The Money Market Benchmark is the Short Term Fixed Interest Composite index (STEFI). The Fixed Income division aims to outperform this index on our clients’ behalf. Credit analysis on State Owned Entities (SOE’s) forms part of the investment decision making process.
The Externally Managed Funds is responsible for managing over R300 billion across domestic and non-domestic asset classes. To achieve this, the PIC allocates funds to external fund managers, who actively invest in the market.
The strategic objectives of the Externally Managed Funds are to meet client objectives of generating alpha within the required risk tolerance, while playing a pivotal role in the transformation of the Financial Services sector and in particular the asset management industry of South Africa.
In 2009, the PIC introduced the External Manager Programme, which aimed to transform the asset management industry by allocating funds to black asset managers. Since its inception, the programme has increased funds allocation to approximately 60% of the domestic external portfolio. Over and above this, the programme monitors and engages established firms on the transformation targets and objectives agreed to with the PIC.
Over the years, the PIC has allocated capital to multitudes of managers. Currently, it has allocated capital to 22 domestic external managers across various asset classes. The Programme has been successful. It has contributed to the performance of our clients’ portfolios and the growth and sustainability of the external managers’ businesses.