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Public Investment Commissioners
PUBLIC INVESTMENT COMMISSIONERS’ ISIBAYA
FUND
Neill Maree: Portfolio Manager
Fuad Cassim: Isibaya Fund Consultant
Public Investment Commissioners
BACKGROUND
• The PIC is not a Development Agency but acts as investment manager in terms of the PIC Act
• The PIC manages funds on behalf of various clients, including the Government Employees Pension Fund
• Investments have traditionally been made in listed securities, i.e. bonds and equities
• These investments are not of a developmental nature
Public Investment Commissioners
BACKGROUND(continued)
• The PIC has, however, also been mandated to invest in “investments which promote social responsibility and infrastructure”
• The Isibaya Fund has been created to house these investments
• The PIC may utilise up to 3,5% of the assets under management for Isibaya Fund Investments
Public Investment Commissioners
Which Investments or Asset Classes?
• Private Equity
• Privatisation
• Infrastructure
• The promotion of sustainable Black Economic Empowerment holds the key to the success of the Isibaya Fund
Public Investment Commissioners
What kind of returns are targetted?
• Bear in mind that the PIC acts on behalf of clients in a fiduciary capacity
• All transactions should be financially viable to qualify.
• Investments should have the potential to provide returns commensurate with the risks attached to the particular assets
• A real return of 10% is therefore targetted
Public Investment Commissioners
Does this mean that there is a possible conflict between investment return and
socially responsible investments?
• No• Some investments have a good change to
provide higher than expected returns• Other investments could, however,
underperform• In the long-term a well diversified portfolio of
investments could provide both the required investment returns and the necessary social impact
Public Investment Commissioners
How does the Isibaya Fund operate in practise?
• Investment proposals are currently evaluated on a deal-by-deal basis
• Investment proposals are submitted for consideration to the PIC’s Investment Committee
• The Investment Committee then makes a recommendation to the PIC Board
Public Investment Commissioners
Will the PIC consider partnerships with other market participants?
• Yes• The PIC cannot operate in isolation in the
South African Financial Markets as this could lead to a so-called “paper-chase”
• Possible partners include the DBSA, the NEF, the IDC, the South African Infrastructure Fund and even other pension funds
• The PIC already has sound working relationships with a number of other market participants
Public Investment Commissioners
What has the PIC achieved?
• The PIC has invested in, amongst others, the N3 Toll Road, the N4 Bakwena Toll Road and the Phamine Tin Mine
• These investments have been structured to yield a return over the medium to longer term – success or failure can therefore not be determined immediately
Public Investment Commissioners
Why Toll Roads?
• In the first place it meets the Isibaya Fund’s requirement to invest in infrastructure
• It creates an opportunity to finance HDI firms to enable ownership
• Toll Roads create jobs and HDI firms can actively participate in not only the construction phase, but also in the ongoing maintenance program
Public Investment Commissioners
Why Toll Roads?(continued)
• HDI firms obtain cash flows from the work which in turn enable them toRepay their financial commitments; andExpand their business
• At the same time investment returns are created for the PIC
Public Investment Commissioners
FUTURE PLANS
• Discussions are to be held with other parties to:Strengthen existing relationshipsCreate the platform for future co-operation with
other role-players
• The Isibaya Fund is in the process of formulating policies with regard to BEE Charters
Public Investment Commissioners
FUTURE PLANS(continued)
• BEE Charters should provide guidance to the market in general on investment requirements
• This may in turn lead to a revised investment strategy for the Isibaya Fund
Public Investment Commissioners
QUESTIONS