Public Investment Corp., South Africa's 1.6 trillion rand ($150 billion) pension fund manager, plans to improve returns by investing to reinvigorate the flagging economy it dominates, Chief Investment Officer Dan Matjila said.
The average annual rate of return for Africa's biggest fund manager should reach 18% to 20% over the next five years from about 16% over the past decade, Mr. Matjila said in an interview in Johannesburg on Wednesday. Mr. Matjila said he would like to double the share of funds allocated to other African countries to 10% of its portfolio and allot a similar proportion to “developmental investments,” which range from education to energy.
“The strategy going forward is how do you invest wisely in the economy so you can catalyze the growth that is needed for the growth of our assets under management,” Mr. Matjila said. He said economic growth needs to reach 4% for the PIC to hit its target. “The size of the assets that we manage account for almost one-third of GDP, so we have huge influence.”
With government workers' pensions making up 90% of the Pretoria-based manager's funds, the PIC is betting that its emphasis on developing South Africa's power generation, roads, banks, communications and education will boost the continent's second-largest economy and improve the returns from the stakes it has in some of the country's biggest companies.
About 80% of the PIC's assets under management are invested in companies traded on the Johannesburg Stock Exchange. A permanent replacement for CEO Elias Masilela has not been named since he stepped down in June.
Mr. Matjila said increasing investments in developmental projects, such as renewable energy, and in the rest of Africa would spur returns.
Having bought stakes in Lome, Togo-based Ecobank Transnational and Lagos-based Dangote Cement, the PIC is seeking holdings in other companies with a similar reach, Mr. Matjila said. Both companies operate across the African continent.
The PIC will put more pressure on companies to improve governance to curb excessive executive pay and avert future failures such as this month's collapse of African Bank Investments, in which the fund manager had a 12% stake, according to data compiled by Bloomberg, Mr. Matjila said.