The Public Investment Corporation (PIC) says that the fallout from Covid-19, locally and globally, along with the country’s domestic economic environment, have greatly impacted assets under management.
The PIC tabled its Integrated Annual Report before Parliament on Thursday (12 November), in line with the requirements of the Public Finance Management Act, 1 of 1999.
The report covers the financial year 2019/2020, ending on March 2020, and includes the PIC’s audited annual financial statements.
The state owned entity (SOC), and one of the largest investment managers in Africa, noted that the value of assets under management (AuM) fell by 10.5% year-on-year, from R2.131 trillion to R1.907 trillion.
It cited the coronavirus pandemic, particularly during the last few months of the financial year as the leading contributing factor. Local listed equities and property portfolios were most affected, recording losses of approximately 19% and 24%, respectively.
PIC chairperson, Reuel Khoza said that the group was well on track to achieve its investment objective of growing clients’ assets before the coronavirus caused untold damage to financial markets.
The JSE Index fell by almost 36% from its highest point in mid-January 2020 to its lowest point in mid-March, as Covid-19 fears and heightened global risk aversion gave rise to large selloffs in the market.
This saw the PIC portfolio lose a significant portion in value in just one month, stemming from losses across all asset classes, with a larger negative impact on listed property and equities.
“Expected sluggish global economic growth will undoubtedly have a bearing on our country and – by extension – on the PIC-managed portfolio,” Khoza said.
“Although we expect the portfolio to perform below initial projections, we remain optimistic that the diversified portfolio will provide a hedge and mitigate against further financial contagion,” he said.
The PIC’s portfolio is made up of domestic-listed equities, unlisted investments, offshore and investments in the rest of Africa.
“The investment strategy focuses on building a diversified portfolio strong enough to withstand and absorb unanticipated market shocks,” he said.
The PIC appointed a new board in July 2019 after a commission of inquiry found lapses in governance.
“The board will continue to strengthen governance, restore confidence in the organisation and drive ethical behaviour,” the PIC said.
“The investment strategy focuses on building a diversified portfolio strong enough to withstand and absorb unanticipated market shocks. In addition to creating financial returns, our investments must also create jobs and expand the provision of infrastructure and social services,” said CEO, Abel Sithole.