South Africa: UIF's Investment Portfolio Outperforms Benchmark

8 September 2022

The Unemployment Insurance Fund's (UIF) investment portfolio has outperformed the benchmark by returning 12.34% against the benchmark return of 12.15% over a period of 12 months.

In a statement on Wednesday, the Fund said its Investment Committee recently met with the Public Investment Corporation (PIC) to receive a report on the performance of the Fund's investment portfolio up to the end of June 2022.

"The performance has been achieved despite withdrawals from the Fund to support the Temporary Employee/Employer Relief Scheme (TERS), a scheme introduced to mitigate the impact of COVID-19 by compensating employees and employers who had lost income due to successive lockdowns, during the height of the pandemic," the UIF said.

Between April 2020 and to date, the UIF has paid more than R61 billion through the COVID-19 TERS intervention to more than 267 000 employers and about 5.4 million workers.

The Fund said that it will continue doing so until all outstanding claims are settled.

Besides TERS, the UIF introduced the Workers Affected by Unrest (WABU) Relief Scheme, which provided financial relief for workers who were affected by the social unrest in Kwazulu-Natal and parts of Gauteng during July of 2021.

Through this scheme, the UIF has so far disbursed R19 million to approximately 15 000 employees in the affected provinces.

The UIF also noted that the good investment performance will enable it to continue to pay all normal benefits to its members, which include unemployment benefits, maternity leave, illness, and parental and adoption benefits.

In its economic outlook as the UIF's asset manager, the PIC indicated that there still remain external risks for the portfolio.

In this regard, it notified the Fund that, notwithstanding the most recent portfolio performance, global market volatility remains at elevated levels despite an initial correction since the beginning of 2022.

Other anticipated downside risks include the prospect of a rapid rise in the US yield curve on the back of rising global inflation (led by rising energy and food prices) which could be a headwind to equity markets, the increasing likelihood of a recession in the US and other major economies.

The risks also include the continued uncertainty about further waves of COVID-19 infections, as well as the length of shutdowns and the resultant economic impact which could weigh in on the market performance.

"The PIC recognises that there are a few investments, particularly in the unlisted portfolio, previously undertaken on behalf of the Fund, that is underperforming or are in financial distress.

"The PIC continues to take corrective measures, including turn-around interventions in investee companies or legal recovery steps, to ensure that the Fund's performance is sustainable and that the overall portfolio continues to grow," the UIF said.

The PIC further notified the UIF that, as part of implementing the recommendations of the Mpati Commission of Inquiry, transactions that were identified in the Commission's Report are currently undergoing forensic investigations.

The PIC has also introduced several initiatives to strengthen governance within the organisation, including strengthening investment processes and Board oversight of investment decisions.

"The PIC has undertaken to continue its implementation of the Fund's investment mandate to ensure that the Fund grows, is sustainable, and that it can meet its legislative obligations of paying out benefits to employees when they are due".

The Fund's mandate is diversified across different asset classes that include inflation-linked bonds, listed equities (both local and foreign), cash and money market, socially responsible investments, or Developmental Investments (DI).

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