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Pension funds’ Q1 returns rise to five-year high

Investment brokers on the trading floor of the Nairobi Securities Exchange (NSE) in Nairobi. FILE PHOTO | NMG
Investment brokers on the trading floor of the Nairobi Securities Exchange (NSE) in Nairobi. FILE PHOTO | NMG 

Pension funds have recorded the highest first quarter return in five years on the back of a good performance by equity investments at the Nairobi Securities Exchange.

Industry data compiled by Actuarial Services East Africa (Actserv) shows pensioners enjoyed a return of 6.7 per cent in the three months to March, compared to 2.5 per cent in the same quarter of last year.

The last time the quarter one return crossed the five per cent mark was in 2013, when it stood at 7.9 per cent. “Equities at 14.8 per cent was the best performing asset class compared to fixed income (3.6 per cent) and offshore assets (-1.8 per cent) in the three months to March,” said Actserv in its report.

In the first quarter of 2017, equities had given the funds a paltry return of 0.2 per cent, fixed income 3.1 per cent and offshore 8.7 per cent.

On an annualised basis, the overall return stood at 23.8 per cent by the end of March, while the three-year return stood at 9.4 per cent.

Actserv surveyed 382 schemes with a total fund value of Sh654 billion.

Impressive gains

In the first three months of the year the stock market recorded impressive gains, with investor wealth (market capitalisation) growing by Sh296 billion to hit Sh2.8 trillion.

The NSE 20 share index was up 3.6 per cent in the quarter, while the NSE All Share Index (NASI) gained 11.7 per cent in the period.

The market has, however, struck a slower note in the second quarter of the year, having ceded ground in April following a correction of share prices amid profit taking by investors.

In April, market capitalisation fell back by Sh172.7 billion, while the NSE 20 Share Index and the NASI retreated by 2.9 and 6.1 per cent respectively.

The funds will also be keeping an eye on the direction of interest rates on government bonds, which make up the majority of the investments.

Should the yields go up the returns from this asset class will be depressed further due to the resulting fall in the price or value of the bonds, while a fall in yields would push the value higher.

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