Markets & Finance

Offshore pension investments earn highest returns in market


Traders at the Nairobi Securities Exchange. PHOTO | FILE

Offshore investments offered pension schemes the highest return in the third quarter of the year at 6.1 per cent, according to a survey by Actuarial Services East Africa (Actserv).

The investments outside Kenya outperformed fixed-income assets that gave a return of 5.3 per cent, while equities continued on a negative run with a return of -4.3 per cent in the quarter.

Although the offshore investments constitute a small part of the total asset base of pension funds, their recovery would still be welcome news for pensioners whose returns have been hard hit by a bearish equities market.

The global markets recovery after Brexit jitters helped boost offshore returns, some of which are also domiciled in tax havens.

“Offshore performance was the highest (at 6.1 per cent) compared to the other asset categories, this was an improved performance from -0.92 per cent witnessed in the second quarter of 2016,” said Actserv in the survey.

In the first quarter of 2016, the return from offshore investments stood at -3.7 per cent and as a result the annualised returns (September 2015 to September 2016) are lower for the offshore investments compared to fixed income and property.

On a one-year basis, fixed income gave a return of 20 per cent, offshore investments (0.6 per cent) and equities (-9.6 per cent). The overall average return is 11.1 per cent.

READ: Pension schemes eye higher returns in risky ventures

A similar survey done by financial firm Alexander Forbes that segregates pension funds based on their risk profiling (either conservative, moderate or aggressive) found that the average return for the one year period to September for offshore investments to be -0.5 per cent.

The Alexander Forbes (AF) survey covered 386 schemes with total assets of Sh597 billion, while the Actserv survey covered 84 schemes with a total fund size of Sh126 billion.

The average return for all schemes surveyed by AF stood at 11.6 per cent, with fixed income at 19.8 per cent and equities at -9.3 per cent.

In terms of the risk profile, the fact that there are higher returns to be enjoyed from fixed income is favouring the schemes that employ a conservative approach.

“Conservative schemes posted the highest returns, indicative of the fixed-income asset class having performed better than the equity asset class over the one-year period. As expected, aggressive schemes having a higher exposure to equities had lower performance over the same period,” said Alexander Forbes.