Pension funds raise investment in equities to 21.5pc

An investor monitors trading at the Nairobi Securities Exchange. FILE PHOTO | NMG 

By CHARLES MWANIKI

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Summary

• Pension funds on average raised equity holdings to 21.5 per cent at the end of June compared to 19.1 per cent in March.
• During the period under review, the schemes cut back their fixed income, offshore and property investments.
• Fixed income investments fell to 72.9 per cent from 75 per cent in March, even though yields on government securities have largely held stable in the period.

Pension funds raised exposure to equities in the second quarter of the year as they looked to take advantage of a recovering stock market.

A pension funds survey by Zamara (formerly Alexander Forbes Financial Services EA) shows the schemes on average raised equity holdings to 21.5 per cent at the end of June compared to 19.1 per cent in March, while cutting back their fixed income, offshore and property investments.

The return to favour of equities came as the market regained some of the ground lost in a two-year bear run.

The NSE 20 share index was up 15.9 per cent in the second quarter of the year after having shed 2.3 per cent in quarter one.

The index has continued its upward trajectory in quarter three and is now 27 per cent up year-to-date.

“The average scheme’s exposure to equities increased over the second quarter. This was mainly driven by strong positive performance in this specific asset class. The fixed income and property exposure decreased over the quarter,” said Zamara in the report.

Fixed income investments fell to 72.9 per cent from 75 per cent in March, even though yields on government securities have largely held stable in the period. Property investment reduced to 4.3 per cent from 4.7 per cent.

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Allocation to offshore investments was up, albeit marginally, to 1.3 per cent from 1.2 per cent in March. Annualised returns from equities were up significantly in the quarter as a result of the recovering market, touching an average of 11.5 per cent by end of June from—11.6 per cent in March.

Fixed income returns were relatively steady at 15.1 per cent from 14.7 per cent in March, while offshore returns rose to 19.6 per cent from 13.6 per cent.

The survey covered 382 schemes with a total of Sh655.1 billion in assets under management.