The investment portfolio of the Unemployment Insurance Fund (UIF) surpassed the benchmark by returning 12.34% vs the benchmark’s return of 12.15% over a 12-month period.
The Fund stated in a statement released on Wednesday that its Investment Committee recently met with the Public Investment Corporation (PIC) to receive a report on the performance of the Fund’s investment portfolio through June 30, 2022.
“The performance was achieved despite withdrawals from the Fund to support the Temporary Employee/Employer Relief Scheme (TERS),” the UIF said. “TERS was introduced to mitigate the impact of COVID-19 by compensating employees and employers who had lost income due to successive lockdowns.”
Since April 2020, the UIF has paid over R61 billion through the COVID-19 TERS intervention to over 267 000 firms and about 5.4 million employees.
The Fund stated that it will continue to do so until all pending claims have been resolved.
In addition to TERS, the UIF implemented the Workers Affected by Unrest (WABU) Relief Scheme, which provided financial assistance to workers affected by social unrest in KwaZulu-Natal and parts of Gauteng in July 2021.
Approximately 15,000 employees in the impacted provinces have received R19 million through this program.
The UIF also emphasized that the positive investment performance will allow it to continue paying all customary benefits to its members, including as unemployment, parental, and adoption payments.
In its economic forecast as the UIF’s asset manager, the PIC stated that the portfolio is still exposed to external risks.
In this regard, it informed the Fund that global market volatility remains significant despite an initial pullback since the beginning of 2022, despite recent portfolio performance.
Other anticipated downside risks include the possibility of a rapid rise in the US yield curve on the back of rising global inflation (driven by rising energy and food prices), which could act as a headwind for equity markets, and the rising probability of a recession in the US and other major economies.
In addition to the persistent uncertainty over additional COVID-19 infection waves, other risks include the length of shutdowns and the resulting economic impact, which might weigh on market performance.
“The PIC recognizes that a few investments previously undertaken on behalf of the Fund are underperforming or in financial difficulties, particularly in the unlisted portfolio.
“The PIC continues to take corrective measures, such as turnaround initiatives in investee companies or legal recovery steps, to ensure the Fund’s performance is sustainable and the overall portfolio continues to grow,” the UIF stated.
As part of following the recommendations of the Mpati Commission of Inquiry, forensic examinations are now being conducted on transactions listed in the Commission’s Report, the PIC informed the UIF.
The PIC has also implemented a number of steps to improve governance inside the organization, such as enhancing investment processes and Board monitoring of investment choices.
“The PIC has committed to continuing its implementation of the Fund’s investment mandate to ensure the Fund’s growth, sustainability, and ability to satisfy its statutory duties to pay employee benefits on time.”
The Fund’s mandate is diversified across many asset classes, such as inflation-linked bonds, listed shares (both domestic and international), cash and money market, socially responsible investments, and Developmental Investments (DI).