Asset allocation in fixed income is currently underutilised
P1.2 billion in cash remains uninvested
FNBB sees opportunity to enhance existing products
The country’s largest fund, the Botswana Public Officers Pensions Fund (BPOPF) has revealed that its strategic asset allocation in fixed income is currently underutilised, with approximately P1.2 billion remaining uninvested.
Moemedi Malindah, the CEO of BPOPF, shared this information during the closing remarks at a recent bond market conference, specifying that the uninvested amount is held in cash.
The Bond Market Conference 2023 centered on the new Pension Fund Rules, which now mandate pension funds to allocate 50% of their assets within Botswana. A phased approach is expected to bring billions in pula into Botswana starting next year, with full compliance targeted by 2027.
Malindah acknowledged the importance of the incoming funds but highlighted existing challenges, stating, “We talk about the money that is coming to Botswana as the key thing. But we have been struggling with many other things before them.”
Despite the 50% requirement, he emphasised the need to invest an additional P1.2 billion held by the asset managers.
BPOPF, managing four portfolios with an AUM of approximately P100 billion, currently holds a strategic asset allocation of P9.2 billion in fixed income.
Malindah noted the deviation from their strategic allocation, emphasising the necessity to invest in fixed income.
He expressed optimism that forums such as the bond market conference could address industry challenges, particularly in achieving a full allocation to fixed income with existing resources.
“The discussion of the 50% coming includes more than just the bond market but many other asset classes,” Malindah added.
Regarding the P1.4 billion in cash, Malindah acknowledged concerns raised by economist Keith Jefferis, who views cash as a last-resort asset with limited potential. Malindah was delighted that the banks were present at the conference which hinted at structured products to absorb liquidity.
Tshepiso Mokgethi-Magapa, Treasurer at First National Bank Botswana (FNBB), sees the influx of funds into Botswana as an opportunity to enhance existing products and develop new ones. She mentioned possibilities such as Equity-linked notes, linked notes, and securitiSation.
Mokgethi-Magapa emphasised the importance for banks to manage the increased liquidity without detriment to pensioners. Malindah, while acknowledging the value of banks’ structured products, stressed the potential for collaboration, stating, “There are a lot of things we can do together.”
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