This growth, as highlighted in the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) 2023–2024 annual report, was primarily driven by improved investment returns influenced by robust equity markets and offshore investments.
The report revealed that nearly all investment asset classes delivered positive returns during the period under review. However, offshore alternative investments and Botswana unlisted equities underperformed, experiencing declines of 20% and 10%, respectively. Notably, the allocation of retirement funds to both local and offshore equities rose significantly by 64%, from P74 billion in 2022 to P88 billion in 2023.
Of the total retirement fund assets, bonds accounted for 16%, comprising P13 billion in domestic bonds and P10 billion in offshore bonds. Cash and near cash represented 11%, with P14 billion in local cash and P1 billion in foreign cash. The remaining P13 billion, or nine percent of total assets, were held in Exchange Traded Funds, local property, and alternative investments.
During the reporting period, P83 billion was invested in listed equities, with P64 billion held in offshore equities and P19 billion in local listed equities. This high allocation to equities aligns with pension funds’ long-term investment strategies tied to their membership risk profiles.
“The Pension Fund Investment Rule (PFR2), introduced in June 2023, increased the domestic investment limit from 30% to 50%, with a five-year transitional plan. By December 2023, retirement funds were required to allocate a minimum of 38% of assets to domestic markets,” read a statement from the regulator.
As of the reporting period, domestic investments stood at 41%, while offshore investments were 59%. Comparatively, in December 2022, offshore investments accounted for 62% (P73 billion) of total assets, whilst local investments stood at 38% (P45 billion).
According to the regulator, domestic investments are expected to increase progressively until reaching the 50% target by 2027. The retirement funds industry’s assets grew by 11%, from P117 billion in 2022 to P130 billion in 2023, primarily driven by offshore investments. Liabilities grew by eight percent, from P116 billion to P125 billion, whilst reserves experienced a significant jump from P975 million to P5 billion, attributed to improved investment performance and a 29% increase in employer contributions.
During the reporting year, retirement fund membership grew by four percent, reaching 376,158 from the 360,147 reported in the prior year. The growth was attributed to an increase in the number of approved sub-funds under umbrella funds. The total membership comprised 292,544 active members, 68,308 deferred members, and 15,306 pensioners.
