Download NGP/NDP Alignment to PIC Developmental

PUBLIC INVESTMENT CORPORATION
established by
Public Investment Corporation Act of 2004
Presentation to Standing Committee of Finance
Discussion points
Discussion items
1. The PIC act
2. The PIC Mandate and strategic Objectives
3. The PIC Clients and Asset Under Management
4. How PIC Invests. AUM and SA GDP contribution
5. NDP Investment Focus in the Listed Portfolio
6. NDP Investment Focus in the Unlisted Portfolio
2
Public Investment Corporation Act
NAME
Public Investment Corporation (PIC)
Legislation
Public Investment Corporation Act of 2004
Clients
Public Bodies: Pension Funds, Trust Funds, Short-term Insurance etc.
Governance
PIC – the Board of Directors with its various committees, the managers and other stakeholders. This is a
huge improvement given the history of the institution which was run by a board of three Commissioners
from 1911 to 1984 and subsequently the Board was assisted by the Executive Committee.
Regulator
Financial Services Board (FSP 19777)
Staff
PIC Employees. PIC strives to pay average market related remuneration to attract and retain best talent.
Mandate
To manage a range of segregated mandates from Government and other public institutions.
Asset Classes: Fixed Income, Equities. Domestic and Nondomestic assets.
• Expansion of Isibaya mandate ( Unlisted Investments) to 5% of GEPF’s AuM.
Management Fees
Average of 3bps for Listed Investments and below market related fees for Unlisted Investments
The PIC is an Asset Manager for all official Sector Funds. Its activities differs from a DFIs such as IDC and
DBSA
3
The PIC Mandate and Key strategic objectives
Mandate:
The PIC mandate is to invest official public sector funds, including pension funds. The investment
mandates are set by clients and the PIC objective is implement the investment mandates.
Vision
 To meet or exceed our clients' investment objectives and commitments to stakeholders
Mission
 The PIC – having been established by 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
4
PIC Top 5 Clients and Assets Under Management
Asset under Management
(31 March 2013)
(“R Billion”)
Asset under Management
(31 March 2014)
(“R Billion”)
Client
Holdings
%
1,252
1,432.7
89.2%
Unemployment Insurance
Fund (UIF)
81
93.7
5.8%
Compensation Commission
Pension Fund (CC)
15
15.3
1.0%
Compensation Commission
Fund (CC)
21
26.3
1.6%
Associated Institution
Pension Fund (AIPF)
14
13.9
0.9%
Others
31
24
1.5%
1 ,404
1,606
100%
Name of Client
Government Employee
Pension Fund (GEPF)
Total
UIF and CC has extended their asset allocation to include Socially Responsible Investments (SRI). These
investments will target investments with huge social and developmental impact such as job creation, social
infrastructure and SMMEs.
5
PIC Asset Classes – Where we invest in
PIC Investments Asset Classes
LISTED INVESTMENTS
(DOMESTIC)
UNLISTED INVESTMENTS
(DOMESTIC)
OFFSHORE INVESTMENTS
(NON DOMESTIC)
Listed Equities (In-house managed)
Private Equity
Global Equities
Listed Equities (Externally managed)
Developmental Investments
Global Bonds
Bonds
Properties
Africa – Listed Investments
Cash & Money Market
Dinamane
Africa – Unlisted Investments
Aprox 70%
Aprox 20%
6
Aprox 10%
Evolution of the PIC Strategic Asset Allocation
Historical Asset Class Allocation
100%
80%
60%
40%
20%
0%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-20%
Bonds (Domestic)
Foreign Government Bonds
Cash and Money Markets
Investment Policies, Structured Inv & Others
Listed Equities (domestic)
Properties
Developmental Investments (Isibaya)
Africa Investments
Global Bonds
Global Equities
7
Broad Investment strategies
Strategy

Listed Equities (domestic) – Out sourced to external Managers. Developmental Manager
Program

Global Equities (Non Domestic) – diversified across various regions/geographies, asset classes.
Managed through third Party Managers

Africa Listed Portfolio (Internally Managed) – Building of the concentrated diversified portfolio
which presents key African economy fundamentals


Africa Listed Portfolio – externally managed by third- party managers
Listed Equities (Domestic) – Core quantitatively managed, with tactical tilts over a period of time

Listed Equities (Offshore) – core managed, with allocation calls managed in house

Fixed Income core Strategies


Properties strategies (Yields)
Unlisted DI (investment approaches through direct, co-investments and Indirect (Fund of
Funds)

Unlisted – Private Equity ((investment approaches through direct, co-investments and Indirect
(Fund of Funds)


Unlisted Debt – ( mainly direct investments and co-investments)
Property Investments ( Unlisted Investments) – Co Investments, Indirectly held, Directly held,
Joint ventures, Asset and Portfolio management

Properties Management ( leasing, Facilities management, properties operations)
Alpha Strategies
Beta Strategies
Unlisted Investment
Strategies
Properties Investments
strategies
Investment Approaches
8
PIC Investment activities
and alignment to
Economic Growth initiatives
Assets under Management Growth
1,600,000,000,000.00
AuM growth since 1995
1,402,212,602,163.75
1,400,000,000,000.00
1,200,000,000,000.00
"R"
1,000,000,000,000.00
800,000,000,000.00
Approx. 16% CAGR
600,000,000,000.00
400,000,000,000.00
200,000,000,000.00
103,153,275,334.00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Year
10
AuM Growth versus SA GDP since 1995
AuM versus GDP growth since 1995
35%
6.00%
AuM growth (YoY)
30%
GDP
5.00%
25%
4.00%
20%
15%
2.00%
10%
1.00%
5%
0.00%
0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-1.00%
-5%
-10%
Economic Growth drives Asset
Growth? And the reverse is true
Rule of Thumb:
-2.00%
Rule _ of _ Thumb :
GrowthAuM  5 * GDP
Can _ AuM _ drive _ GDP ? :
GDP  f ( Investment _ in _ economic _ catalytic _ assets )
11
GDP Growth
AuM Growth
3.00%
SA GDP and PIC AuM since 2004
PIC has a significant influence in the economy
Year
GDP (current prices R m)
AuM (R m)
2004
1 415 273
377 340
26.7%
2005
1 571 082
445 077
28.3%
2006
1 767 422
584 539.
33.1%
2007
2 016 185
706 639
35.0%
2008
2 256 485
775 366
34.4%
2009
2 406 401
730 334
30.3%
2010
2 659 366
907 025
34.1%
2011
2 917 539
1 029 643
35.3%
2012
3 155 195
1 169 447
37.1%
Average
32.7%
 Asset Base more than 1/3rd of SA GDP
 PIC can make a difference by investing prudently in the economy
12
AuM/GDP
The Virtuous Cycle of Economic growth & Assets
Growth
Economic
Growth
Asset
Growth/Returns
Developmental
Investments
Growth in
AuM
Investment in
Catalysts for
Economic
Growth
Prudent Asset Allocation
13
Active Investment Approach to stimulate Economic Growth
Traditional Approach ( Last 20 years)
The New Approach ( Now and going Forward)
•
Passive investment strategy
•
Active Investment approach through
Developmental investments and alignment
with key government economic priorities
•
Benchmark driven approach, very low
focus on being active in sectors that
stimulate growth
•
Developmental Investment focus within
Benchmark parameters. Economic stimulus.
•
Unlisted Investment approach was mainly
focused on large narrow based BEE
funding.
Moderate to average social impact focus
•
Unlisted Developmental Investment Policy
well defined and broaden to cater all aspects
of development ( Allocation 5%), strong focus
on Job creation
Active Listed DI approach
•
•
•
Lower risk portfolio, on average over +/15% CARG over 20 years
•
Alignment with government policies to exploit
investment opportunities created by
government, eg NGP, NDP policies
•
•
Expected targeted portfolio returns >15%
High social impact
14
SA GDP composition detail by ranking(Top 5)
GDP =
G
1
General
government
services (18.4%,
ZAR191bn)
+
C
+
I
Food, beverages &
tobacco (26%,
ZAR498bn))
Manufacturing (18%,
ZAR105bn)
+
Ex
-
Im
PGM's (14.4%,
ZAR102bn)
Crude oil (15.8%,
ZAR131.5bn)
Gold (9.9%,
ZAR71bn)
Motor vehicle
parts &
accessories
(7.7%, ZAR64.2bn)
2
Education (17.9%,
ZAR186bn)
Transport (16%,
ZAR307bn)
Community, social &
personal services
(17%, ZAR102bn)
3
Social protection
(12.9%,
ZAR131bn)
Utilities (16%,
ZAR300bn)
Transport, Storage &
communications
(15%, ZAR91bn)
Iron ore (8.6%,
ZAR61.5bn)
Radio, tv &
communications
(7.2%, ZAR60bn)
4
Health (10.5%,
ZAR110bn)
Miscellaneous goods &
services (11%,
ZAR220bn)
Finance, insurance &
real estate (15%,
ZAR90bn)
Coal (8.1%,
ZAR57.4bn)
Motor vehicles
(7.1%, ZAR59bn)
5
Public order and
safety (10.2%,
ZAR106bn)
Health (10%,
ZAR182bn)
Mining & quarrying
(13%, ZAR75bn)
Motor vehicles
(7.5%, ZAR54bn)
Petroleum
products (6.0%,
ZAR50bn)
15
Targeted Sectors to stimulate GDP growth
‘The Smart Approach to Investing”
Targeted Sectors
Partners
PIC Approaches
Government
SOEs and DFIs
Private
Sasol, JSE Listed Oil and
Gas companies
Oil and Gas Sectors
Targets investing companies both locally and
internationally with significance influence in the
sectors
Department of Energy, Department
of Minerals, PPPs
PetroSA, DBSA,
IDC
Manufacturing and
Beneficiation
(industrials)
Target established companies for expansion in
manufacturing of motor vehicles, processing and
assembling, mineral beneficiation and domestic
supply of inputs. Greenfields projects in
manufacturing
Department of Trade and Industry,
Department of Minerals,
PetroSA, DBSA,
IDC
Financial Service
sector
Targeting collaboration with Banks insurance
companies to co invest in developmental
investments, and expansion capital for companies
that needs to grow
National Treasury
FSB, SARBS,
DBSA, IDC, AFDB,
IFC, AFDB, “ the
BRICS Bank”
JSE Listed Banks, ( both
top % and lower Tier
banks)
Economic
Infrastructure
Sectors (power,
construction, water,
ICT)
POWER generation (Build and list Power utility
companies, IPPs in Gas, Coal, Nuclear “Clean
Technology in the Long Term”
Department of Transport,
Department telecommunication
and ICT Department of Higher
Energy, Department Water affairs
ESKOM, SANRAL,
TELKOM, DBSA,
IDC, AFDB, IPPS,
PPPs
JSE Listed energy
companies , Unlisted
companies in downstream
energy, Telecom, ICT and
water sectors
Social Infrastructure
(Health, Education &
Affordable Housing)
Investments into education (Built Operate and
Transfer +-20years) in partnership with the
government. Investment in hospitals, PPPs,
affordable housing to middle income households
Department of Human Settlement,
Department of health, Department
of Higher Education, Department
of Basic Education.
DBSA, IDC, AFDB;
Health care and
Pharmaceuticals
companies eg Adcock,
Aspen
Real Estate
Provide best and quality offices for all the
Government departments and other public official
sector entities
Department of Public works;
National Treasury, Municipalities
Various departments
DBSA, IDC, AFDB;
Various both listed and
unlisted property
companies and funds
SMMEs
Investments into SMMEs, support to SMEs financing
intermediaries
Department of SMEs, Department
of 16
Trade, Municipalities
NEF,DBSA, IDC,
Various SMME finance
intuitions, eg Business
Developmental Investment Approach
For social, economic or
environmental impact
Where
Developmental
Investment
portfolio will sit
Charity, grants,
Government
transfers
For no
financial
return
Investor expects
only principal
returned
Development
finance
institutions
For
financial
return
Most investments
occur here
(including the
main part of the
PIC portfolio)
N/A
Not for social, economic
or environmental impact
17
Proof of the pudding is in the
eating….
Developmental Investing for Economic Transformation (DIET)
Unlisted Investments
Developmental Investments
Economic
Social
Infrastracture Infrastructure
Sector Focus:
Roads
Rail
Transport &
Logistics
Energy
Ports (air, sea,
rail)
Water, ICT,
Mining
Sector Focus:
Affordable
Housing
Health
Education
Social
ameninties
Priority
Sector
Investments
Dinamane
Sector Focus:
Agriculture
Agroprocessing
Manufacturing
beneficiation
Tourism
Private Equity
Environmental
&
Sustainability
South African
Private
Equity
Sector Focus:
Sector Focus:
Sector Focus:
SMEs across
all sectors
Renewable
energy
Clean technology
Green buildings
Sustainable
environments
Across all
sectors with a
focus on
tranformation.
Africa
Private
Equity
Properties
South
Africa
Africa
Properties
Properties
Sector
Focus:
Sector
Focus:
Sector
Focus:
Consumer
driven
sectors,
other
sectors will
be viewed
oppotunistic
Retail
Industrial
Offices
Retail
Industrial
Offices
DIRECT= “Developmental Investing for a Radical Economic Transformation”
18
The GEPF DI, NGP and NDP
(the Link)
National
National Development Plan
Development
Sets
long term vision for overall economic and
Plan:
New Growth Path
Developmental
Investments
Its all about investing for
the greater good of the
economy, and ensuring
sustainable long term socio
– economic development
to South Africa and the rest
of the continent
15ys + - Developmental Policy
Economic strategy designed to shift
South Africa's development
trajectory over the medium term,
aiming to set the economy onto
faster , more sustainable inclusive
and production -led growth part
Growth and employment goals
achievable through the following
drivers of job creation:
 Infrastructure
 Main economic sectors (
Manufacturing, mining, and
agriculture)
 Green economy
 Investing in social capital and
public services
 Spatial development
 African Economic integration
2020
19
social development in South Africa.
Integrates
economic
Sets long
term ,social, demographics,
environmental and governance elements into a
vision for
overall
coherent
framework
economic
Outlines
proposals to adress the triple challenge
andocidevelopmen
of reducing inequality, unemployment and
t in
poverty
South Africa.
Integrates
economic, social,
demographics,
environmental and
governance
elements into a
coherent
framework
2030
NGP/NDP Alignment to PIC Developmental
Investments
NDP Chapter
How PIC respond to the
NDP Initiatives
Objectives & Actions
ECONOMY AND 1. Decrease unemployment
•
EMPLOYMENT:
through investment in
Agriculture and AgroFocus on
processing. (Increase youth
sectors and
and rural employment)
clusters that
2.
Mineral Cluster :Improve
have high
growth and income distribution
potential for
3. Manufacturing: promote
growth
localisation and diversification
stimulation
4. Finance Sector: Partnerships to
provide project finance
5. Broaden ownership of assets to •
historically disadvantaged
groups.
Priority Sector Pillar:
Currently R3 Billion
Committed. Since
inception R967 million
was invested in
Agriculture, Agro
processing industries,
Mining Beneficiation and
tourism sectors.
PIC Key Achievements
Since inception in excess of 53 270 jobs have been
created. Some of the key contributors (2014/14FY) are:
 Through the construction of the renewable energy,
currently the labour force is sitting at 24 183 of which
13 303 are from the local communities
 Dinamane has created an excess of 10 000 jobs through
the SMMEs funding and support
 Priority sector has created a total of 4 107 jobs
(permanent and seasonal) in the agricultural sector.
Private Equity: R 5 Billion
Majority of the seasonal workers were employed for a
committed through the
period of over 6 months. The investee companies
current mandate. Since
managed to employ 144 youth.
Inception R22,8 billion
was invested in financial  In 2013/14 financial year over 309 SMEs were created
services and
and financed and 21 467 loans were distributed to the
transformation across
small scale entrepreneurs in rural communities
various sectors
 Over 10 communities and Employee trust have been
formed and financed as a way of broadening assets
• Dinamane: R1. 5 Billion
ownership by the historical disadvantaged groups
committed through the

current mandate across all In addition The PIC provides enabling opportunities for
BBBEE partners to participate in the broader economic
sectors with a focus on
SMMEs.. Since inception market through a loan agreement that will afford them
R697 million was invested equity of an investee company and/or by taking an
across all sectors with a
equity stake of certain investee companies with a plan to
focus on SMMEs – High
exit to a BBBEE parties in the near future
job creation impact
20
NGP/NDP Alignment to PIC Developmental
Investments
NDP Chapter
Objectives & Actions
How PIC responds to the NDP
Initiatives
1. Increase electricity capacity and  Economic Infrastructure: R5
billion committed through
access, including investing in
current investment. Since
renewables.
inception R3.8 billion was
2. Increase access to clean water.
ECONOMIC
invested in Transport &
3. Improve public transport, ports
INFRASTRUCTURE
Logistics, ports, Rail, Telecoms,
and rail.
water, ICT & Broadband,
4. Competitively priced and widely
Energy, Resources
available broadband.
infrastructure and , shale gas
5. Optimise coal, shale gas and
sectors
fuel resources.
• Environmental Infrastructure:
R5 Billion committed through
1. Protect ocean resources.
current investment. Since
ENVIRONMENTAL
2. Decrease greenhouse gas
inception R8,6 billion was
SUSTAINABILITY
emissions.
invested in renewable energy,
AND RESILIENCE
3. Reduce volume of waste
shale gas, green economy,
4. Better agricultural technologies
recycling focus.
and agro-processing.
1. Improve infrastructure and
•
service delivery in rural
INCLUSIVE RURAL
economies.
ECONOMY
2. High agricultural potential land
3. Improving small scale and
commercial agriculture and link
to the markets
PIC investment to Lanseria and Road
Concession which is N3 Toll Concession,
Track and South African Toll Roads
Company-Bakwena Platinum

Infrastructure Bonds support through
Fixed Income department



Social Infrastructure ( R5 Billion 
Committed) – Social Housing
improving living standards and
priority sectors
21
PIC Key Achievements

Direct investment to nine (9)
renewable energy projects in South
Africa of which one is currently
operating (soutpan).
Invested in the construction of 318
MW of solar energy in Limpopo and
Northern Cape and development of a
fuel bio-ethanol plant in the Free state
Building of 100 bed Private hospital in
Shoshanguve, Lakes hospital in
Mpumalanga.
Just Veggies investment that is building
the capacity of rural farmers through the
Community Trust model. The company is
incubating the communities that has
benefited from the Land Reform
programme and have no capacity or skills
for farming.
NGP/NDP Alignment to PIC Developmental
Investments
NDP Chapter
How PIC responds to the NDP
Initiatives
Objectives & Actions
•
•
•
SOUTH AFRICA IN
THE REGION AND
THE WORLD
•
1. Boost intra-regional trade and
implement a regional
integration strategy
2. Build partnerships across the
African continent.
1. Better spatial planning
2. Upgrade all informal
settlements.
TRANSFORMING
HUMAN
SETTLEMENTS
•
MoUs signed with various African strategic
Partners ( AFDB, EBID, PTA, IDC, DBSA)
•
Smart State strategy
Rest of Africa Private Equity: R5, 2 billion)
committed through the current mandate. Since
•
inception, R2,6 billion was invest in financial
services and transformation across various
•
sectors
Africa Development Investment (DI): US$500
(R5, 2 billion) committed through current
investment. Since inception R2 billion was
invested in Energy, transport and logistics, social
infrastructure and other related sector, water and
information communication technology

Social Infrastructure ( R5 Billion Commitment) 
– Affordable housing, Education and Health care
22
Strategic investments across
all regions which capture the
African themes
Signed MoUs with strategic
partners such as AFDB
Fostering economic
integration in African continent
through investments into
infrastructure,
telecommunication and
Energy
Investment that provides
affordable housing to date
over 70 000 housing units
have been developed.
An investment into home
loan financial service
company with a target on
affordable housing loans to
government employees and
middle to lower income
households (Gap Housing)
NGP/NDP Alignment to PIC Developmental
Investments
NDP Chapter
IMPROVING
EDUCATION,
TRAINING AND
INNOVATION
HEALTH CARE
FOR ALL
SOCIAL
PROTECTION
How PIC responds to the
NDP Initiatives
Objectives & Actions
1.
Improve the quality of education
2.
Focus on early childhood development.
3.
Eradicate school infrastructure backlog
4.
Expand higher education system.
5.
Further vocational training (non-
•
•
Improve life expectancy
Improve primary healthcare
Prevent and reduce the disease burden
Implement National Health Insurance
Build human resources in the health sector
All children should enjoy access to nutrition,
health care, education, social care and safety.
2. Create opportunities for the unemployed.
•
3. Address the skills deficit in the social welfare
sector.
4. Mandate retirement savings for all workers,
and maintain the government social assistance
net
1.
2.
3.
4.
5.
1.
23

19 200 learners have
received quality education
through an investment
with School and Education
Investment Fund

Construction of three
Private Hospitals of which
two might open during the
2014/15 financial year. In
rural areas and secondary
towns.
Social Infrastructure ( R5 Billion
Commitment) – Affordable housing,
Education and Health care
Social Infrastructure ( R5 Billion
Commitment) – Affordable housing,
Education and Health care
Social Infrastructure ( R5 Billion
Education and training support
Commitment) – Affordable housing,
providing training in the social
Education and Health care
welfare sector
How we deliver...?
Systems
and Technology
Over .. Systems, Online real
time portfolio management,
Research data base,
reporting tools, strong back
up systems
People
Robust Risk management
And
strong Governance
controls
Human talent
PIC has over 100 investment
Professionals
Over 250 support staff and
properties management team
3 offices
24
Strong internal Risk and
compliance management team,
internal Audit team. Strong
aligned and efficiency
governance committees.
Strong Policies
Conclusion
25
Conclusion
 We believe that we have a bigger and important role to play in the economy through our
investment activities
 Our developmental investment strategies are well aligned to government key priorities
and most importantly policy of regional integration with the rest of the continent
 The goal remains to be the best modern asset manager of choice for all official sector
entities both in South Africa and Globally.
 Investing for the good cause to the livelihoods of all South Africans and rest of Africans
remains our key priorities, while at the same time delivering sustainable long term returns
to our clients
26