The DPF is the country’s second-largest pension fund after the Botswana Public Officers Pension Fund, and the largest covering the private sector.
The DPF’s positive performance was driven by stronger economic growth, positive earnings outlook, declining inflation and the weakening dollar, officials said in a commentary released recently.
According to the DPF’s numbers, the top-performing asset class in the second quarter was African Equities which increased by 10%, followed by global equities which rose by 7.99 percent and emerging market bonds which advanced by 6.52 percent.
DPF officials said African equities’ performance during the quarter was driven by increased demand, strong commodity prices, and robust economic growth.
“African equities continue to deliver improved returns after a prolonged period of significant underperformance, thereby becoming a strong diversifier for the fund’s portfolio. “Emerging market equities, global property and global cash delivered a strong performance in the quarter, generating 5.31 percent, 2.49 percent, 2.29 percent respectively,” the officials stated.
Domestic assets similarly generated positive returns for the quarter with Botswana property, equities, and bonds yielding 2.22 percent, 4.45 percent, and 1.97 percent respectively. Botswana cash returns were muted for the quarter returning 0.26 percent.
The performance of local equities is reflected in the northward climb of the Botswana Stock Exchange which thus far this year has gained 12.1%, one of its strongest outturns in recent years.
During the period, global investor optimism remained high as markets continued with positive momentum from the previous consecutive quarters.
However, China was the worst-performing asset in the second quarter, with returns declining by 7.63 percent.
“China’s economic recovery remains weak, subsequently dampening investor sentiment,” DPF officials explained.
The DPF’s robust performance in the second quarter mirrors the pension fund sector’s broader rebound this year. Statistics released by the Bank of Botswana last Friday indicate that the value of local pension fund assets from about P118 billion in December, to P130.5 billion in June.
Pension funds, which are predominantly invested offshore, endured a trying 2022 with much of the losses associated with downtrends in global giants such as Meta, Apple, Amazon, Netflix, and Google, the global tech giants.
The situation was mirrored at the Bank of Botswana where the pula value of the foreign reserves took a beating on the global bond market, where returns sank to three times worse than their all-time low.
Much of the value this year has come from gains in global equities and stronger returns both locally and on the continent.
Officials, however, said the current market dynamics warrant caution, prudence and a disciplined investment strategy which will safeguard consistent and positive returns.
“The fund continues to monitor key risks as it moves into the second half of the year comprising of fragile global growth, persistent inflation, hawkish central banks, geo-political tensions and supply chain disruptions,” the officials stated.
