Pension funds once again turned to fixed income and property investments last year to escape an underperforming equities market, fresh industry data shows.
Data compiled by fund administrator Zamara shows that fixed-income investments as a percentage of total investments rose from 61.4 to 63.4 percent in the 12 months to December 2018, while property investments rose from 9.9 percent to 12.3 percent.
On the other hand, funds cut equity outlay from 26.7 percent to 22.6 percent during the year as well as offshore investments allocation from two percent to 1.7 percent.
The result was that conservative schemes that allocate the bulk of their funds to fixed income ended the year with a higher return compared to those with a more aggressive risk profile that were hurt by underperforming equities and offshore investments.
“Aggressive schemes posted the lowest returns caused by a higher allocation to the equity and offshore asset classes, which have been the lowest performing asset classes,” said the Zamara report.
Fixed income returns stood at 14.6 per cent last year, compared to 14.9 per cent in 2017, while equities returned -13.4 per cent compared to 2017’s 29.3 percent.
Offshore returns fell to -13.2 percent from 21.8 percent.
A study by Actuarial Services East Africa (Actserv) revealed a similar trend in investment class distribution and returns profile among the schemes surveyed — by and large the same market players also polled by Zamara.
Actserv survey found that the weighted average return for all schemes returns last year was five per cent, down from 18.7 percent in 2017.
Zamara reported the weighted average return at 5.4 percent compared to 18.1 percent in 2017.
Actserv said equities had a return of -11 per cent last year compared 28.7 percent in 2017, offshore fell to -11.6 percent from 23.9 percent while fixed income returns stood at 13.8 per cent last year from 14.5 percent in 2017. Zamara polled 415 schemes with a total of Sh756.9 billion assets under management, while Actserv’s survey had 422 schemes with a total fund value of Sh759 billion.