NPF-NSF Investment Committee

Transcription

1 NPF-NSF Investment Committee Press Meeting of 14 June 2013 Brief 1.0 The National Pensions Fund (NPF) and National Savings Fund (NSF) An overview The National Pensions Fund was created in 1978 following the proclamation of the National Pensions Act It is based on a two-tier system in which Government finances payment of the universal basic pensions whilst earnings related contributory benefits are paid to insured persons or their dependents, on the basis of contributions paid to the scheme by the insured persons and their employers. The National Savings Fund was set up under the National Savings Fund Act, 1995, to replace the Employees Welfare Fund. The NPF is a defined benefit scheme whilst the NSF is a defined contribution scheme. At retirement, beneficiaries of NPF would receive a monthly pension based on a fixed formula (approximately equivalent to a third of lifetime earnings) and NSF beneficiaries would receive a lump sum largely dependent on the contributions made by employers and the performance of investment made by the fund. 2.0 NPF/NSF investment of surplus funds An NPF-NSF Investment Committee, holding full powers, has been set up under the Act for the purpose of determining the manner in which surplus funds of the NPF and NSF are to be invested. Aon Hewitt Ltd. is the Investment Adviser reporting to the Investment Committee. The Investment Committee is a tripartite body, comprising representatives of Government, Employers and Employees. The Committee is chaired by the Financial Secretary. The members of the Investment Committee are as follows: Chairman Mr. Ali Mansoor, Financial Secretary Government representatives Mr. G. Gopee, Director, Office of Public Sector Governance Mr. S. C. Romooah, Deputy Accountant General Mr. C. Paddia, Lead Analyst Employers representatives Dr. A. Jeetun, Director, Mauritius Employers Federation Mr. Pierre du Mée, Estate General Manager, The Constance & La Gaité S. E. Mr. V. Bussawah, General Manager, LCA Mauritius Employees representatives Mr. M. P. Odit, Treasurer, MTUC Mr. V. Naugloo, President, UFO; Secretary General, FCSOU 1

2 3.0 NPF/NSF investment principles The objective of NPF investment process is to provide a level of return adequate to meet its longterm pension obligations and asset protection. As such all investment decisions are based on 3 basic investment objectives namely: return, security, and liquidity. These broadly reflect the needs as stipulated in the NPF legislation. The Investment Committee s approach to meeting these objectives and managing the risks involved are agreed and documented in the Investment Guidelines of the National Pensions Fund and the Investment Guidelines of the National Savings Fund. Following the funding recommendations contained in the latest actuarial review of 2005 performed by the fund's actuary, namely the UK Government Actuarial Department ( the GAD ) an investment return of CPI inflation + 4% and CPI inflation + 3% is targeted for the NPF and NSF respectively (a 4%/ 3% real return). Targeting a higher expected return would mean taking on more risk and the Investment Committee has deemed this imprudent in the light of its objectives. The next actuarial review is expected to be completed later this year and the above targets will be reviewed (and amended if necessary), based on the findings of the actuary. 4.0 Position of the NPF and NSF at 31 December 2012 and changes during the year: In order to meet its objectives, the NPF Investment Committee aims to hold a well-diversified portfolio comprising of many investment classes, currencies and regional exposures. Diversification helps reduce the impact that a single, poorly performing investment can make on the overall portfolio. During 2012, NPF and NSF grew by nearly MUR 9.3bn and MUR 2.1bn respectively. The asset allocations of the NPF and NSF (on a Market Value basis) as at 31 December 2012 were as follows: Asset Allocation of NPF Foreign Currency Deposits, 10.3% Foreign Investments, 8.9% Property, 1.0% M auritian Equity, 12.5% Corporate Bonds, 0.5% Rupee Deposits, 7.5% Rupee Loans to Institutions, 0.4% M auritian Government Bonds, 59.0% 2

3 Asset Allocation of NSF Rupee Deposits, 5.7% Foreign Investments, 5.0% M auritian Equity, 3.1% Corporate Bonds, 0.9% Rupee Loans to Institutions, 0.2% M auritian Government Bo nds, 75.5% We will give a brief review of some of the important investments for the past year: Local Government Bonds and Bills The core holdings for both Funds comprise local treasury bills, treasury notes, and government bonds and both Funds have been buyers of these instruments during the last year. This continues to be the largest investment of the NPF and the NSF as it has, in the past, offered the best match for the liabilities of the Funds. Yields have however been under downward pressure during The Mauritian Repo Rate decreased by 0.5% during March 2012 and the local monetary market remains highly liquid. Given the lower yields, the Investment Committee has been cautious when investing in these instruments. Fixed Income instruments have only been purchased when the yield offered was perceived as being attractive and likely to help the Funds achieve their benchmark return. The NPF added nearly MUR 400 million of long term Government bonds (10 year maturity and above) to its portfolio. These bonds represented an ideal match for the liabilities of the Fund and the yields obtained were considered as satisfactory. Additionally, the NPF bought MUR 640 million of Inflation linked bonds during November. NPF and NSF return on Mauritian Government securities during the year amounted to 8.90% and 6.97%. Secured Corporate Bonds/ Notes As mentioned previously, the Investment Committee is willing to consider investing in quality bonds with attractive yields which are being issued by well known local companies. 3

4 During 2012, NPF and NSF invested Rs 450 million and Rs 150 million respectively in secured 5 year fixed rate notes issued by Omnicane Ltd. The yield on these 5 year Notes amounted to 7.15% p.a. The Investment Committee is of the view that such fixed income investments will diversify the existing portfolios and also enhance returns. Local Equities NPF increased its exposure to local listed equities during Equities, although volatile, have historically tended to generate average returns greater than both inflation and when compared to returns of other asset classes over time. The price weakness in the local stock market during 2012 was also considered as an opportunity and a good entry point. Besides the current stock market dividend yield of nearly 3.3% was viewed as attractive from a yield perspective. During the year, NPF invested a net amount of around Rs 1.3 billion in a diversified portfolio of local listed shares. At present, NPF has good exposure to the banking sector. It is however underweight in the hotel sector. Overall, all the equity investments have contributed to further diversification of the portfolio. NPF equity return on its local portfolio (which includes listed shares, unquoted shares and mutual funds) amounted to 12.9% during It highly outperformed the SEMTRI which recorded a performance of -5.5% during the same period. NSF local equity portfolio also registered a commendable performance with a return of +18.5% during Looking ahead, it is intended to invest cautiously in local listed equities whenever there are attractive opportunities. Moreover, both Funds will favour diversification and avoid being exposed to a few securities only. It is believed that this higher equity exposure could potentially enable NPF more easily achieve its benchmark return in the medium term, given the superior performance of equities over time. There will furthermore be a gradual disposal of shares in which NPF/NSF is currently overweight so as to reduce sector/stock specific risk. At the time of writing (May 2013), it is important to highlight that the share prices of several local listed shares have increased significantly since end December This is likely to impact positively on both NPF and NSF return for Local Property The Ebene buildings held by NPF generated a return of 5.5%. This excludes the impact of any potential revaluation. The Investment Committee is moreover currently examining various options which could give NPF exposure indirect exposure to property investments abroad. Foreign Equities and Alternatives The foreign investments held by both funds performed remarkably well during the year ended 31 December A performance of 18.8% and 18.2% was registered for NPF and NSF respectively. Valuation of foreign equity holdings benefitted from both higher stock 4

5 prices as well as the appreciation of the major currencies (US Dollar, Euro and Pound Sterling) against the Mauritian Rupee. During the year, NPF made an additional investment of nearly MUR 700 million in various foreign funds (global, Africa, emerging markets, commodities, etc). It should be stated that the above figure includes an investment of Rs 50m in a 5 year principal protected commodity basket note. Besides the diversification benefits coming from commodities, the capital protection (in Mauritian rupees) was considered attractive. These investments are in line with the strategy of portfolio diversification by NPF. 5

6 5.0 NPF/NSF performances during the year ended 31 December 2012 Both Funds showed positive returns (+10.2% for NPF and +7.2% for NSF) over the year ended 31 December This represents a return over CPI of +6.6% and 4.1% for NPF and NSF respectively. Performance targets for NSF were above target over 1, 3 and 5 year periods. However, the NPF was slightly below target over 5 years and higher than the benchmark over 1 year and 3 years. The above performance is quite commendable, bearing in mind the recent low yield environment and volatile stock prices over the last five years. The overall returns continue to be dominated by the significant holdings in local fixed income instruments, especially Government of Mauritius Bonds and Treasury Notes. In the table below, we show the performance of the NPF and NSF over the short-, mediumand long-term. On account of its significant stable fixed income portfolio, the NPF and NSF have outperformed most of the local investment funds with important fixed income exposure over the one year, three years and five years periods. The full performance of the Funds by asset class is given in the attached Appendices. Summarised Cumulative Returns to 31 December yr 3yrs 5yrs NPF 10.2% 29.7% 54.4% NSF 7.2% 27.9% 57.0% Anglo-Mauritius Secure Fund 7.0% 23.7% 48.4% Anglo-Mauritius Mixed Fund 6.4% 17.5% 26.6% MCB Yield Fund 5.2% 19.8% 44.2% MCB General Fund 0.3% 4.3% -1.5% NMF General Fund 0.1% 8.0% 0.7% Port Louis Fund 10.6% 24.4% 21.7% CPI (year-on-year) 3.6% 13.7% 29.7% 6.0 Future Strategy In accordance with section 38 of the NPF Act, the NPF/ NSF Investment Committee is tasked with the investment of any surplus assets held by the NPF and NSF. When taking decisions, with the advice of the NPF Board, it needs to balance the following investment objectives: The need to maximize return The need for security The need for liquidity The need for national development 6

7 As it stands, the portfolio of the NPF is reasonably well diversified with international (incl. foreign currencies) exposure at 19.2%. Equity related (local, foreign and alternatives) exposure is around 21.4%. The Investment Committee recognizes that exposure to equities and alternative investments could be gradually increased over time, given the current financial situation and future projections. This is nonetheless being done prudently given continued volatility and uncertainty in the financial markets. The NPF/ NSF Investment Committee will seek to ensure that the Funds generate reasonable riskadjusted returns under both positive and negative future market conditions in the long run. 7.0 Concluding remarks The NPF and NSF have combined assets of approximately MUR 100 billion and represent a tremendous fiduciary responsibility. The Investment Committee, through its ongoing efforts, aims to ensure that the expectations of all stakeholders are met by employing an independent and professional approach in line with best international practice. 7

8 ANNEX Status of the Funds as at 31 December 2012 The status of the portfolio of Investment as at 31 December 2012 is given in the tables below. NATIONAL PENSIONS FUND PORTFOLIO OF INVESTMENT AS AT 31 DECEMBER 2012 NPF Market 31/12/2011 Market 31/12/2012 Percentage Of 31/12/2011 Percentage Of 31/12/2012 Capital Gains during period Income received during period Net Inflow (outflow) during period Return Rs. Rs. % % Rs. Rs. Rs. % Mauritian Government Bonds 47,163,019,055 49,420,195, % 59.0% 721,433,088 3,546,610,752 1,535,743, % Corporate Bonds - 451,322, % 0.5% 1,322,260 10,754, ,000, % Mauritian Equity 8,346,387,441 10,430,184, % 12.5% 789,135, ,145,215 1,294,661, % Rupee Loans to Institutions 379,926, ,328, % 0.4% 2,392,765 29,085,260-67,991, % Rupee Deposits 3,772,605,502 6,239,525, % 7.4% -5,999, ,060,052 2,472,919, % Foreign Investments 5,665,112,063 7,472,823, % 8.9% 1,113,860,364 15,291, ,850, % Foreign Currency Deposits 8,265,349,734 8,591,077, % 10.3% 607,416, ,698, ,688, % Property 819,000, ,000, % 1.0% - 45,266, % Total 74,411,400,412 83,738,457, % 100.0% 3,229,560,723 4,668,912,664 6,097,496, % 8

9 NATIONAL SAVINGS FUND PORTFOLIO OF INVESTMENT AS AT 31 DECEMBER 2012 NPF Market 31/12/2011 Market 31/12/2012 Percentage Of 31/12/2011 Percentage Of 31/12/2012 Capital Gains during period Income received during period Net Inflow (outflow) during period Return Rs. Rs. % % Rs. Rs. Rs. % Mauritian Government Bonds 11,572,311,735 12,414,148, % 75.5% 363,383, ,500, ,453, % Corporate Bonds - 150,440, % 0.9% - 3,584, ,000, % Mauritian Equity 416,444, ,177, % 3.1% 67,461,140 11,344,546 19,271, % Rupee Loans to Institutions 51,061,212 39,452, % 0.2% 786,903 1,835,677-12,395, % Rupee Deposits 215,233, ,755, % 5.7% - 5,618, ,521, % Foreign Investments 693,602, ,625, % 5.0% 126,022, % Foreign Currency Deposits 1,383,692,522 1,571,688, % 9.6% - 53,207, ,996, % Property % 0.0% Total 14,332,346,726 16,432,287, % 100.0% 558,094, ,092,156 1,541,847, % 9