Pension Schemes increase equity exposure to ride on post-election wave

By Francis Zyder

In summary:

  • The stock market has maintained an upward trend with performance of the NSE All Share Index at 21.7% despite the electioneering period
  • Fixed income assets accounted for 70.8 per cent of the average pension fund allocation followed by equity investments at 23.9 per cent, property (3.9 per cent) and offshore (1.4 percent
  • Pension schemes covered under the Z-Cass survey reported an average return of 15.4 per cent in the 12 months to 30 September 2017, up from 13.8 per cent that was recorded in the preceding quarter.
  • Schemes in Kenya have varying risk profiles; the survey classifies the schemes in to three categories – Conservative, Moderate and Aggressive.
  • Equity investments had the highest median return over a one-year period at 27.1 per cent followed by offshore at 20.3 per cent and fixed income at 12.8 per cent.

Pension schemes asset allocation to the equity asset class increased over the quarter ending 30 September 2017. This was primarily due to the positive performance from this asset class.

The Zamara Consulting Actuaries Schemes Survey (Z – CASS) for the third quarter of 2017 shows that the average allocation of equity investments increased to 23.9 per cent from 21.5 per cent in the second quarter.

“The stock market has maintained an upward trend with performance of the NSE All Share Index at 21.7% year to date to 30 September 2017, despite the electioneering period. The strongest influence of the positive performance has been Safaricom and Banking stocks over the period. Following the Supreme Court ruling upholding results of the repeat presidential elections we have seen stocks such as Safaricom touch historic highs and this tide has lifted the entire market as Safaricom makes up a significant portion of the stock market,” said Zamara Group Chief Executive Officer Sundeep Raichura.

Fixed income assets accounted for 70.8 per cent of the average pension fund allocation followed by equity investments at 23.9 per cent, property (3.9 per cent) and offshore (1.4 per cent).

Pension schemes covered under the Z-Cass survey reported an average return of 15.4 per cent in the 12 months to 30 September 2017, up from 13.8 per cent that was recorded in the preceding quarter.

The Z-CASS Survey additionally showed that participating schemes had a median return of 8.9 per cent return over a three-year period.

Schemes in Kenya have varying risk profiles; the survey classifies the schemes in to three categories – Conservative, Moderate and Aggressive. During the 12 month period, schemes with aggressive risk had the highest median performance and conservative schemes had the highest 3 year median performance. Equity investments had the highest median return over a one-year period at 27.1 per cent followed by offshore at 20.3 per cent and fixed income at 12.8 per cent. Fixed income assets recorded the highest return over a three-year period at 12.5 per cent, followed by offshore investments at 11.9 per cent and equities at 1.2 per cent.

372 Schemes were covered in the in the Z – CASS Survey in the third quarter of 2017 and the assets under management covered by the survey were at Ksh633 billion.

The Z- Cass Survey enables trustees to compare the performance of their retirement scheme relative to their peers within the broader retirement scheme industry.

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