Update: Amendments to regulation 28 of the Pension Funds Act
Amendments to regulation 28 of the Pension Funds Act
The final version of the amended Regulation 28 has been tabled before Parliament. If accepted, it will come into effect on 3 January 2023.
Notable amendments:
- A definition of crypto-assets is added and it is stated that funds are prohibited from investing in crypto-assets.
- A new definition of hedge fund is included – funds may invest in hedge funds, subject to conditions that may be prescribed.
- A definition of infrastructure is included as being “any asset that has or operates with a primary objective of developing, constructing and/or maintaining physical assets and technology structures and systems for the provision of utilities, services or facilities for the economy, businesses, or the public”. The aggregate exposure by a fund to all issuers in respect of direct infrastructure, across all asset categories, excluding any debt instrument issued or guaranteed by the South African government, may not exceed 45% of the aggregate fair value of the total assets of the fund. A new table was inserted to be used to report on infrastructure investments.
- The exclusion of the look-through principle in respect of the underlying assets of a hedge fund or private equity fund, does not apply in the case of infrastructure investments in a hedge fund or private equity fund.
- The limit of 95% for housing loans granted to members in terms of section 19(5) of the Pension Funds Act, has been lowered to 65%. This will apply with effect from 1 September 2023, in respect of loans/loan guarantees entered into on or subsequent to that date and does not apply in respect of loan guarantees that have been entered into prior to 1 September 2023.
- The aggregate exposure by a fund per issuer or entity, in respect of all asset categories specified in Table 1, irrespective of the limits referred to in Column 1 of Table 1, must not exceed 25% of the aggregate fair value of the total assets of the fund, excluding any debt instruments issued by, and loans to Government and any debt or loan guaranteed by the Republic.
- The aggregate exposure limit is increased from 35% to 45% for the following: certain debt instruments not listed on an exchange; preference and ordinary shares in companies, excluding shares in property companies, not listed on an exchange; immovable property, preference and ordinary shares in property companies, and linked units comprising shares linked to debentures in property companies, not listed on an exchange; hedge funds; private equity funds and any other asset not referred to in Table 1 of regulation 28.
- The aggregate exposure limit is increased from 15% to 20% for preference and ordinary shares in companies, excluding shares in property companies not listed on an exchange.
- The limit applicable to private equity funds is increased from 10% to 15%.