Much of the losses in pension funds this year are associated with investments in the international tech sector, where downtrends in global giants such as Facebook, Apple, Amazon, Netflix and Google (known as FAANG) have led market turbulence.
Last year, the value of pension fund assets surged to P120.1 billion in December from P106 billion in January, buoyed by the robust performance of the FAANG group.
Thus far this year, Facebook, known as Meta, has shed 70% in its share price or $640 billion, while the others have equally retreated by between 15 and 50%, wiping billions of dollars more off the books for investors.
Figures released recently by the Bank of Botswana indicate that local pension funds have not been spared the market rout, with the value of their collective holdings in offshore equities falling by P8.1 billion to P50.6 billion between January and September. The value of offshore bonds and cash held by local pension funds equally fell, by 15 and one percent respectively.
By September, 60.2% of pension fund assets were held offshore, the lowest level since April 2020. By comparison, the performance of local assets somewhat helped pare losses for the pension funds, with the value held in local equities rising to about P15 billion in September from P13.9 billion in January.
While the rise in local equities may include the homeward drift of assets previously invested offshore, analysts said much of the growth was attributed to the superior performance of the Botswana Stock Exchange’s flagship platform, the Domestic Companies Index (DCI). By Wednesday, the DCI had risen by just over nine percent since the beginning of the year, led by strong performances in counters such as Standard Chartered Bank Botswana, First National Bank Botswana, Letlole la Rona and Sechaba Holdings.
By comparison, over the same period last year, the DCI had gained 1.7 percent, while it had shed about 8.2% over the corresponding period in 2020. NBFIRA acting director of Retirement Funds, Phineas Sesinyi said the turbulence in the performance of the markets where pension funds are invested was largely the result of global uncertainties.
“From the beginning of this year, we have seen a contraction because of what’s happening around the world such as the geopolitics, high inflation, rising interest rates and others,” he told a recent media briefing.
“What’s happening globally has really affected the pension funds and we hope the coming year will be better.” For his part, NBFIRA CEO, Oduetse Motshidisi said the Authority has also commenced a study to assess the strength of the retirement funds industry in Botswana, in relation to its sustainability. “The study will also evaluate the social impact and coverage of the retirement system in Botswana,” he told journalists.
