Financial Services Editor

THE Public Investment Commissioners (PIC) is unlikely to put its lucrative equity fund out to tender this year as expected.

The PIC is busy re-signing year-long management agreements with the five asset managers who look after its equity fund, and is unlikely to reallocate the money in the short term.

The five are Old Mutual Asset Management, Sanlam Investment Management, Stanlib, RMB Asset Management and Futuregrowth.

This will come as a blow to a number of smaller asset managers waiting in the wings and hoping for a share of the PIC's sizeable war chest.

At the end of last year, the PIC managed R309bn in funds, mostly belonging to the Government Employees' Pension Fund. In 1996 it allocated a large chunk of its war chest to the external portfolio managers.

According to the latest Reserve Bank's Quarterly Bulletin, they controlled R82bn in government pension fund money at the end of December last year.

Asset managers earn a basic fee for looking after the PIC funds, but the new mandates also include a performance-related portion. Although the funds were widely expected to be put out to tender again this year, the new management agreements will give the PIC breathing space.

"I think there would have to be a fairly lengthy process before funds are put out to tender again," said one asset manager, who declined to be named.

"My best guess is that the PIC and the pension fund have a whole host of priorities they have to deal with before reallocation and manager

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selection process." He said one issue that the PIC would want to look at was its investment strategy.

Analyst say the PIC has been tightening its focus since former deputy director-general of the National Treasury Brian Molefe took over last year.

A restructuring of the GEPF to include a board of trustees may also be delaying the process. At the moment, the finance minister is the sole trustee.

Molefe said last week that there was no decision yet on a fresh tender. "We have said there will be a fresh tender, I am not able to say when," he said.

"The last one (tender) was done four or five years ago, and so one would expect that now and again we should do it again. It's not for life."

According to Ajay Lalu, who is the director of black economic empowerment strategic services at Ernst & Young, many asset managers have been preparing for the new tender, by ensuring their empowerment credentials.

"There was a big flurry of empowerment deals in asset managers about a year ago in anticipation of these funds being replaced," said Lalu .

May 25 2004 07:20:58:000AM Stephen Gunnion Business Day 1st Edition