Schemes dump NSE stocks for risk-free bonds

Nairobi Securities Exchange trading floor. FILE PHOTO | NMG 

By JAMES KARIUKI
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Summary

• Pension schemes’ appetite for riskier investments reduced to 22 percent in the first quarter from 39 percent reported in the previous quarter owing to the Covid-19 pandemic.
• The 2020 first quarter Zamara Consulting Actuaries Schemes Survey (Z-CASS) report shows schemes took the 'cash' flight to avert loss of value by reducing stakes in listed companies.
• Proceeds realised were channelled towards fixed income assets raising the proportion to 75 percent, up from 72.5 percent reported in the previous quarter.

Pension schemes’ appetite for riskier investments reduced to 22 percent in the first quarter from 39 percent reported in the previous quarter owing to the Covid-19 pandemic.

The 2020 first quarter Zamara Consulting Actuaries Schemes Survey (Z-CASS) report shows schemes took the 'cash' flight to avert loss of value by reducing stakes in listed companies.

Proceeds realised were channelled towards fixed income assets raising the proportion to 75 percent, up from 72.5 percent reported in the previous quarter.

"Equities allocation was at 18.8 percent, down from 21.7 percent at the end of the previous quarter on account of the fall in valuations in the equity market. Property and offshore allocation were at 5.7 percent and 0.5 percent respectively," adds the Z-CASS report.

Pension schemes, insurance companies and commercial banks as well as corporate, foreign and other institutional investors are major investors in equities.

The Covid-19 pandemic that first wreaked havoc in the developed world countries motivated many foreign investors to sell their stakes in listed stocks at the Nairobi Securities Exchange (NSE) and markets globally.

On March 11, NSE registered the single-largest drop in value after foreign investors sold stocks held in blue chip companies worth Sh125 billion to close at Sh2.2 trillion.

Standard Investment Bank's quarter one market summary showed stocks favoured by foreign investors like Safaricom, Equity Bank Group, EABL and Bamburi Cement shed capital slashing the value of shares at the Nairobi bourse by Sh523.9 billion.

According Z-CASS, schemes with a higher exposure in equities suffered losses with the largely conservative schemes reporting a better one-year return at 7.2 percent above the 6.1 percent inflation rate and a 2.7 percent gain in the first quarter.

Pension schemes' investments in real estate and offshore investments also face a bleak future, as the Covid-19 pandemic has hurt the two asset classes now reporting depressed returns.