Pension fund portfolios can benefit from impact investments

By including impact investments in their portfolios, pension fund trustees can increase returns for members and reduce risks through diversification, as well as address the social challenges facing South Africa.

This is the view of Mark van Wyk, portfolio manager at Mergence Investment Managers, who addressed the Institute of Retirement Funds conference today on “Social responsible investment (SRI) and its spin-offs: benefits to members”. Impact investing is part of SRI and seeks to achieve good long-term returns while making a positive social and/or environmental impact.

Mr van Wyk said: “Pension fund trustees, as custodians of capital, and fund managers, as managers of capital, have a huge responsibility towards pension fund members to ensure favourable long-term returns.

“At the same time, South Africa as a nation has a number of serious structural challenges ranging from high levels of unemployment, and crumbling infrastructure to poor educational outcomes and housing and spatial planning that marginalises the poor.

“The pension fund members we serve are affected daily by some of these challenges. We all form part of an integrated economic system. By investing in impact investments, trustees can play their part in uplifting communities and contributing to the country’s growth.”

Mr van Wyk said that while social challenges are essentially government’s responsibility, numerous government departments have requested assistance from the private sector and specialised impact investment funds provide a ready vehicle through which to invest.

The Mergence High Impact Debt Fund for example, invests directly into mature, unlisted businesses, including social housing companies (providing housing in areas where people can work and live), and housing financiers (where banks do not want to lend), as well as education lenders and unsubsidised public transport.

“Such investments further encourage the growth of these industries, encouraging social and environment entrepreneurs to find solutions to the challenges facing South Africa, active pension fund members and pensioners,” said Mr van Wyk.