From about P9.6 billion at the end of the first quarter of the year, the country’s second-largest pension fund ended the second quarter with net total assets of P9.2 billion.
“Investor pessimism seeped into markets driving both equities and bonds to fall further, thereby providing investors with limited opportunities for growth in the quarter,” the pension fund said in a recent update to its members.
“The Standards and Poor’s 500 Index suffered its worst first half for more than 50 years (while) inflation in developed markets such as the United States and the Euro-zone was above eight percent, prompting central banks to take a hawkish monetary policy stance, thereby raising interest rates accordingly.”
DPF officials said while the fund had generally performed well over the last 12 months, since the beginning of the year, its performance had been substantially impacted by elevated levels of inflation coupled with exogenous risk events which have led to monetary policy tightening.
Russia’s invasion of Ukraine in February and the subsequent shock to global markets have been key drivers of volatility during the period.
“Initially, central banks were forecast to gradually tighten monetary policy, but the unusual mix of exogenous supply shocks caused by COVID-19 and geopolitical events such as the Russia-Ukraine war have generated multi-decade high inflation,” the DPF said. “This in turn has put pressure on central banks to tighten monetary policy swiftly. “The Russia-Ukraine war has resulted in rising commodity and energy prices that are leading to multi-decade high levels of inflation.”
During the second quarter of the year, nearly all of the DPF’s asset classes recorded negative performances, led by the Global Property portfolio which declined by 11.2%. Botswana Equities, Botswana Property, African Equities, Emerging Market Bonds, Global Bonds, Global Equities, Emerging Market Bonds, and Emerging Market Equities all declined during the second quarter.
The pension fund, however, noted a strong rebound in its Chinese investments.
“The top performing asset class for the fund was the China Equities which increased 9.66 percent in pula terms. “This is a welcome development for the Fund which followed months of underperformance by the China asset class as legislative changes impacted the technology sector while debt pressures on large property classes raised concerns of major defaults amidst the pressure on demand and supply promulgated by China’s Zero COVID policy,” the DPF said.
An analysis of the DPF’s asset classes indicates that locally, the top performer was Botswana Bonds where returns rose by 1.74 percent during the second quarter, followed by Botswana Cash which increased by 0.31 percent.
Local bonds and cash accounted for 9.7 and 1.9 percent of the DPF’s portfolio respectively by June 30, while local equities accounted for just over 16%.
The DPF’s data trends show that on a five-year basis, the benchmark return of most of its asset classes has been positive.
