Most pension fund managers are cautious to try out new investment vehicles, instead restricting themselves to a narrow product portfolio at the Nairobi Securities Exchange (NSE), a new report says.
Kenya’s below-average score (44 points) on market depth metric in Absa Financial Markets Index 2018 report despite the launch of new products has been linked to concentration on traditional products by market players.
Speaking during the launch of the report, Absa Group head of markets George Asante said the capital markets will require a lot more education for the institutions that manage funds to start appreciating new products.
“There are products in the market that are hardly trading — there has to be a change in psychology on new products. The fear of doing new things is a culture that tailored education can help eliminate,” said Mr Asante.
He challenged NSE and the Capital Markets Authority to engage people and institutions that manage funds to help them appreciate the returns on the new products apart from them being an avenue to diversify portfolio.
NSE has seen new products such as NewGold Exchange Traded Fund, M-Akiba bond and real estate investment trusts (Reits) fail to sparkle. The introduction of Growth Enterprise Market for small firms has equally failed to impress.
The report noted that Kenya is among the countries where pension fund trustees and other asset owners lack in-depth expertise to take on new products.
“Respondents in these countries said a lack of expertise hindered the development of new financial products by reducing their willingness to or ability to invest in more complex and adventurous assets and strategies while pursuing stable returns,” notes the report.
Kenya, it points out, has more sophisticated domestic investor base but with a shortage of investment vehicles to fit investor needs.
“This hampers pension funds’ ability to fulfil their roles as contractual savings institutions by forcing them to over-invest in asset classes with maturities that are not well matched to their longer term liabilities.”