Amendments to Regulation 28 of the Pension Funds Act to encourage infrastructure investment by retirement funds
5 July 2022
The National Treasury today publishes the final amendments to Regulation 28 of the Pension Funds Act, as published as Notice No. 2230 in Government Gazette No. 46649 of 1 July 2022).
Regulation 28, issued in terms of section 36(1)(bB) of the Pension Funds Act, protects retirement fund member savings by limiting the extent to which funds may invest in a particular asset or in particular asset classes, and prevents excessive concentration risk. The regulations widen the scope of potential investments for retirement funds but continues to leave the final decision on any investment to the trustees of each fund, who determine the investment policy for any fund.
These amendments follow two rounds of public comments in 2021. The aim of the amendment is to explicitly enable and reference longer term infrastructure investment by retirement funds, by increasing maximum limits that funds may invest in. To this extent, the amendments introduce a definition of infrastructure, and sets a limit of 45% for exposure in infrastructure investment. To further facilitate the investment in infrastructure and economic development, the limit between hedge funds and private equity has been split. There will now be a separate and higher allocation to private equity assets, which is 15% increased from 10%.
Retirement funds will continue to be prohibited from investing in crypto assets. The excessive volatility and unregulated nature of crypto assets require a prudent approach, as recent market volatility in such assets demonstrates.