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Aggressive pension funds enjoy higher returns at bourse

NSE staff monitors stock trading on a board. FILE PHOTO | NMG
NSE staff monitors stock trading on a board. FILE PHOTO | NMG 

Pension funds with a high risk appetite of pumping funds into equities in the past one year enjoyed a higher return compared to the more conservative peers, a new industry survey shows.

The survey by Zamara for the period ending March 31 shows the schemes, which on average allocated 32.2 per cent of assets into equities by the end of March—classifying them as aggressive schemes— enjoyed an average return of 23.4 per cent in the year to March.

In the same period, schemes that took a moderate risk stance, with 27.2 per cent of assets in equities, enjoyed an average return of 22.5 per cent, while those with a conservative stance (8.5 per cent in equities) had a return of 17.2 per cent.

The overall average return for all schemes over the one year stood at 22.4 per cent.

Over a longer period of three to five years, however, the aggressive schemes recorded a lower return due to the bear run of 2015 and 2016, which hit equities valuations.

“Aggressive schemes had the strongest performance over one year, superior to conservative and moderate schemes. The narrative for the three-year period changes, with conservative schemes generating the highest median return and aggressive schemes posting the lowest,” said Zamara in their report.

“This is indicative of the aggressive schemes benefitting more from the strong equity performance as they had a higher allocation to equities over the year while conservative schemes performed strongly over the three-year period due to the bear run in the equity market in 2015 and 2016.”

Conservative schemes largely put their investments in fixed income, the survey shows, at an average of 91.3 per cent, while property and offshore investments take up 0.1 per cent each.

Moderate schemes’ fixed income allocation stood at 71.8 per cent, with aggressive schemes at 53.6 per cent.

Overall the schemes enjoyed an average return of 49.1 per cent from equities in the 12 months to March, riding on the good performance of stocks at the NSE in the period, where the NSE All Share Index was up 46.5 per cent in the period.